Image source: Robyn Mackenzie © 123RF.com
The Governing Board of Directors of the Reserve Bank of Australia met on Tuesday when it was decided that no changes to the interest rate should be implemented at the current moment.
The interest rate thus remained unchanged at 0.75 per cent, something that was mostly anticipated by market experts. What was unexpected, however, was the prevailingly positive tone that the Governors expressed in the post-decision statement.
As we argued in our ‘Weekly Expectations’ update from Monday, the bushfires and the outbreak of the novel coronavirus could prompt the RBA to seek an insurance against the uncertainty that could come about from these events.
The central bank recognized these issues and reflected on them in its monetary statement; however, it was revealed that no emergency precautions should be made currently, as the RBA remains vigilant and observant.
“One continuing source of uncertainty, despite recent progress, is the trade and technology dispute between the US and China, which has affected international trade flows and investment. Another source of uncertainty is the coronavirus, which is having a significant effect on the Chinese economy at present. It is too early to determine how long-lasting the impact will be.”
Overall, the Governing Board of the RBA came off sounding optimistic regarding the prospects for growth in Australia over the next two years.
“The central scenario is for the Australian economy to grow by around 2¾ per cent this year and 3 per cent next year, which would be a step up from the growth rates over the past two years. In the short term, the bushfires and the coronavirus outbreak will temporarily weigh on domestic growth.”
These and other optimistically sounding outtakes from the monetary policy statement have encouraged traders and investors, who started betting on a long-expected recovery of the Australian dollar, which was nearing historical lows prior to the monetary meeting.
The AUDUSD, supported by the suddenly changed sentiment in the market, bounced back above the major support level at 0.67000, following the release of the statement.
In doing so, the pair managed to finalize a textbook Elliott Wave Pattern, which made the bulls regain their confidence.
After the conclusion of the 1-5 impulse waves, the price completed a bearish ABC correction, which now appears to be exhausted too.
The price is currently attempting to break out above the mid-level resistance at 0.67500.
AUDUSD 1D Price Chart. Image source: Trendsharks ©, created with TradingView.com
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