April RBA Meeting
The Australian dollar has continued to trade higher this week. The RBA left rates unchanged at its April meeting, which provided support for the currency.
Following two rate cuts and the restarting of QE in March, the RBA opted to hold policy at current levels for now while it continues to monitor the situation.
The rate cuts announced last month marked the first time since 1997 that the RBA has acted outside of its regularly scheduled meetings. This was a clear sign of how serious the situation had become.
Unemployment to Increase
The market was keen to see how the bank judged its March adjustments were working.
In the statement released along with its decisions this week, the RBA said:
“The coronavirus remains first and foremost a very major public health issue, but it is also having very significant effects on economies and financial systems around the world. Many countries are expected to experience large economic contractions as a consequence of the public health response. Large increases in unemployment are also expected.”
Economic Recovery Projected
However, the more dovish parts of the statement were more optimistic. It went on to say:
“Once the virus is contained, a recovery in the global economy is expected, with the recovery supported by both the large fiscal packages and the significant easing in monetary policy that has taken place.”
The statement also noted that there are “some signs that markets are working more effectively than they were a few weeks ago.” It explained that this “partly reflects the substantial measures undertaken by central banks.”
No Rate Increase Planned Yet
In terms of guidance, the RBA governor said:
“The comprehensive policy package announced last month will also support the expected recovery,”
Specifically on rates, the RBA statement noted:
“The Board will not increase the cash rate target until progress is being made towards full employment and it is confident that inflation will be sustainably within the 2–3 percent target band.”
The meeting provided support for AUD given the broadly optimistic tone from the RBA governor. Price action in AUD currently is mapping the moves seen in equities markets.
Price is potentially carving out a low here in order to build a broader recovery.
AUDUSD Back Above Major Technical Level
The recovery in AUDUSD has seen price breaking back above the 2008 lows of .6000. While above here, focus is on a further push higher. The recent .6214 level is the key resistance to break.
If price can break above here, confirming a higher low at the recent retest of .6000 support, focus will be on a move up to the next .6666 level next.