Amid sharply heightened concerns over North Korea’s latest missile tests that have rattled markets across the globe, the Reserve Bank of Australia delivered a rather uneventful statement early on Tuesday that reiterated key points from past statements while keeping its key interest rate unchanged at 1.50%, as expected.
The RBA statement highlighted improving conditions in the Australian and global economies, including strong employment growth, but also warned of weak wage growth and low inflation. Appreciation in the Australian dollar, which has partly been driven by a falling US dollar, was cited as being a likely contributor to continued low inflation and pressure on economic output.
In the aftermath of the statement, the Australian dollar rose against the still-pressured US dollar, which temporarily boosted AUD/USD above the key 0.8000 psychological level on Tuesday before some of those gains were pared. The next two days will be critical for the Australian dollar, with Wednesday featuring the release of Australia’s quarterly GDP reading (+0.8% expected) for the second quarter, and Thursday showcasing Australian retail sales (+0.2% expected) and trade balance (+0.95B expected), both for July.
From a technical perspective, AUD/USD continues to trade within a strong uptrend, driven in part by a persistently weak US dollar, that has been in place for at least the past three months. This uptrend is framed by both a well-defined uptrend line as well as the key 50-day moving average. The noted 0.8000 psychological level has served as major resistance since late July, as the currency pair has been unable to follow-through on any tentative breach above that level. With the strong bullish trend in place, however, along with enduring US dollar weakness and a solid rally in gold prices, an upside breakout extending the AUD/USD uptrend is a strong possibility. With any sustained breakout above 0.8000 resistance, the next major upside targets are at the 0.8100 and 0.8300 resistance levels.