Home Fundamental Comment Australian dollar rebounds as RBA shows no easing bias

Australian dollar rebounds as RBA shows no easing bias

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RATES PREVIEWThe Australian dollar rebounded against the U.S. dollar on Tuesday after the Reserve Bank of Australia held interest rates while provided no signs of monetary easing.

The RBA opted to leave its cash rate at 2 percent, after slashing it by 25 basis points last month, yet the bank did not hint to cutting interest rates in the coming months.

“Further depreciation seems both likely and necessary, particularly given the significant declines in key commodity prices,” RBA governor Glenn Stevens has reiterated.

The depreciation of the currency is favored by the RBA as it reinvigorates economic growth, where the RBA would prefer to see its currency exchanged at 75 US cents.

However, the Aussie dollar rose against its U.S. counterpart following the RBA announcement to hit a high of 0.7707, whilst it is currently trading around 0.7690.

It seems that the rise in the Aussie versus was triggered by the selloff in the green currency before this week’s U.S. jobs report.

The dollar retreated from six-week high against a basket of major currencies on some profit taking.

The greenback rose on Monday after the release of upbeat U.S. manufacturing activity and construction spending data.

U.S. employers added 225,000 jobs last month, following an increase of 223,000 in April, the NFP report due on Monday may show.

AUDUSD

According to the 4-hour chart, the AUDUSD rose after the breach of pivot point at 0.7660, yet faced resistance at 0.7698.

The first support was found at 0.7595, where the breach of resistance at 0.7635, which now has turned into support, helped the pair to resume its rise.

The divergence between the price and the RSI 14 momentum indicator depicted on the chart gave investors a hint that this could be a reversal area.

The RSI rose after dropping to the 30 line yet the rally stooped after hitting the 50-center line.

Aussies rebounds after RBA

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Ahmed Mamdouh Ahmed Mamdouh, Co-Founder and Head of English Fundamental Analysis at FXComment.com, with 7 years of experience in the financial markets. Mamdouh holds a Master’s Degree in Economics from The American University in Cairo and a Bachelor Degree in Economics from The Faculty of Economics and Political Science, Cairo University.

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