Australian dollar extends rally
The Australian dollar continues to impress and is in positive territory for a third successive day. AUD/USD punched into 74-territory earlier in the day before retreating slightly.
Australian dollar shrugs off retail sales decline
The news wasn’t good from Australian Retail Sales, but the Aussie continued its upswing nevertheless. Retail Sales for Q2 came in at -1.8% for a second straight quarter. Investors didn’t wince, however, as the reading matched the forecast. The release looks better on an annualized basis, with a gain of 2.9% compared to Q2 of 2020, when consumer spending was depressed at the height of the Covid pandemic.
The US dollar isn’t getting much love at the moment, and sentiment towards the Aussie remains high after the RBA surprised the markets and announced that it was on track to taper bond purchases in September. There had been growing expectations that the RBA would walk back from its pledge in July to scale back bond purchases, but the Bank has decided to go ahead, despite the recent uptick in Covid in Australia which has resulted in extensive lockdowns.
RBA Governor Philip Lowe sounded positive about the economic outlook, and emphasized the resilience of the economy, which he expects to rebound despite the pandemic. Still, even with the surprise taper announcement, the RBA’s monetary policy remains dovish. The taper program will be reviewed in November, and Lowe reiterated that the Bank does not plan to raise rates prior to 2024.
The markets will continue to keep a close eye on the central bank for the remainder of the week. RBA Governor Philip Lowe testifies before lawmakers on Thursday and the RBA releases quarterly economic forecasts on Friday.
AUD/USD Technical
- AUD is testing resistance at 0.7402. This is followed by resistance at 0.7456
- AUD/USD has support at 0.7305. Below, there is support at 0.7262
