Sydney Harbor Bridge and Opera House on a sunny day. Image source: Lin Chu-Wen © 123RF.com
The Governing Council of the Reserve Bank of Australia (RBA) met earlier to deliberate on its current monetary policy stance. The Council expectedly decided to maintain the near-negative Cash Rate unchanged at 0.10 per cent.
The Council commented on the lifted economic conditions in Australia and elsewhere, weighing on the likely continuation of the global economic recovery. Similarly to what the Reserve Bank of New Zealand observed recently, the RBA projects uneven but accelerating global stabilisation.
For the time being, the Council will not be scaling up its underlying asset purchase facility. The RBA is close to completing the first bond purchase program of $100 billion, totalling a net $74 billion of government bonds issued by the Australian Government. A further $100 billion will be purchased once the first cycle is completed.
In the monetary policy statement, it is further posited that:
"The outlook for the global economy has improved over recent months due to the ongoing rollout of vaccines. While the path ahead is likely to remain bumpy and uneven, there are better prospects for a sustained recovery than there were a few months ago. […] The positive news on vaccines together with the prospect of further significant fiscal stimulus in the United States has seen longer-term bond yields increase considerably over the past month. This increase partly reflects a lift in expected inflation over the medium term to rates that are closer to central banks' targets."
Meanwhile, Australian inflation remains subdued but slowly rising, as per RBA's longer-term economic projections.
Australia Inflation Rate. Image source: TradingEconomics.com
RBA's February monetary policy decision did not alleviate any of the rising bearish pressure on the Australian dollar in the short-term, as the Aussie continues to give ground to the recuperating greenback.
As can be seen on the 4H chart below, the AUDUSD took a U-turn recently, and the pair looks poised to continue depreciating in the near future. The downtrend is likely to resume after the current bullish pullback is concluded.
The price action developed a minor throwback towards the 100-day MA (in blue), currently converging with the major support (presently resistance) level at 0.78000.
Once a new swing peak is developed, the downtrend is likely to continue heading down south towards the major support level at 0.76000. The MACD indicator underpins this mounting bearish momentum.
AUDUSD 4H Price Chart. Image source: Trendsharks ©, created with TradingView.com
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