The results of the penultimate meeting of the Reserve Bank of Australia this year were in favor of the Australian currency. The AUD/USD pair impulsively jumped to the level of 0.6930, but still did not reach the main resistance level - 0.7000 - the upward impulse was repaid due to a rise in the price of the US dollar, which quite unexpectedly strengthened throughout the market. By and large, the pair remained in the same positions as before the RBA meeting. Neither bears nor AUD/USD bulls could benefit from the rhetoric of the Australian regulator.
On the eve of the November meeting, most market participants expected to hear extremely soft rhetoric from RBA members. The likelihood of another round of interest rate cuts was quite high, given the previous statements by Philip Lowe. Therefore, traders were ready for one of the dovish scenarios: either the RBA reduces the rate at the November meeting, or warns of a decrease in December. Just a week before the November meeting, the head of the Australian regulator hinted at a possible easing of monetary policy in the near future. He said that the central bank is ready for such a step, as soft monetary policy is supporting the economy. At the same time, Lowe assured market participants that rates would remain low for a "long period" of time.
But, to the surprise of many traders, the overall position of the Reserve Bank was more restrained. On the one hand, the regulator really recognized that it could continue to lower the rate "in the event of such a need." On the other hand, the RBA said that the measures taken earlier are already yielding results. According to the RBA members, easing monetary policy parameters supports the growth of employment and income, stimulating inflation indicators to return to the medium-term target range.
In other words, at the moment, the regulator does not see the need for a further interest rate cut, since the preventive measures taken demonstrate the necessary result. The RBA makes a reference to the latest labor market data in Australia, which really turned out to be quite strong: the country's unemployment rate unexpectedly dropped to 5.2%, and the increase in the number of employees amounted to almost 15 thousand, mainly due to full employment, while partial employment, on the contrary, showed negative dynamics.
All this suggests that the Australian regulator will continue to maintain a wait-and-see attitude, preserving the available measures of influence "on a rainy day". First of all, we are talking about external risks: for example, another escalation of the trade war between the United States and China will again bring the issue of rate cuts back on the agenda. But at the moment, the regulator does not need to get ahead of events, especially amid rumors that Beijing and Washington are ready for a compromise solution. It is also worth recalling that in one of his speeches, Lowe focused on the side effects of low interest rates. He acknowledged that their decline "does harm and damage to those people who rely on interest income." The head of the RBA recalled that under ideal conditions, the growth of key economic indicators should be due to "improving the investment environment, fiscal stimulus and structural reforms."
Thus, the bearish forecast regarding further actions of the RBA did not materialize. The central bank took a break, but pledged to "keep the gunpowder dry" in order to resort to another round of rate cuts if necessary. Such findings supported the Australian currency, given the previous dovish expectations of most analysts. In many cross-pairs (in particular, AUD/NZD), the aussie strengthened by more than 100 points. However, the upward dynamics was limited when paired with the US dollar,.
The greenback significantly strengthened its position due to the growth of the ISM index in the non-productive sphere and the hawkish speeches of the Fed representatives, as well as due to the flow of positive news regarding the prospects of the negotiation process between the US and China.
In particular, the head of the Federal Reserve Bank of San Francisco, Mary Daly, said yesterday that she did not see the need for further rate reductions, since it was "at the right level." At the same time, the Daly fully supported all three rate cuts this year. Earlier, another representative of the dovish wing of the Fed - the head of the Federal Reserve Bank of Minneapolis Neil Kashkari - said that he was satisfied with the current rate. Kashkari, as you know, is one of the main supporters of monetary easing by the US central bank. Such statements neutralized the fears of traders regarding further easing of monetary policy at the beginning of next year (while Jerome Powell, I recall, following the results of the last meeting of the Fed did not exclude this option).
Such a fundamental background does not allow the AUD/USD bulls to gain a foothold within the 69th figure, not to mention the assault on the 70th level. Further strengthening of the US dollar will put pressure on the aussie, however, the Australian dollar will also resist the downward trend due to the expectant position of the RBA. All this suggests that the pair is likely to get stuck in a wide-range flat, where the lower boundary corresponds to the mark of 0.6800 (the Kijun-sen line, which coincides with the lower boundary of the Kumo cloud), and the upper to the mark of 0.7000.
