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Hawkish RBA statement pushes AUD/USD higher

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Hawkish RBA statement pushes AUD/USD higher

The currency markets consolidated on Tuesday the second day of the new month as traders in the US came back from a long weekend holiday.  Traders needed to absorb better than expected data in China along with an RBA’s statement which overshadowed Australia’s weaker retail sales and a larger than expected current account deficit.

Australia reported soft July retail sales of 0.1% versus and consensus estimate of 0.4% and a stronger than expected second quarter current account deficit of $9.4 billion Australian dollars from a revised $8.7 billion in the first quarter. The numbers were trumped by the Reserve Bank of Australia’s statement following their interest rate decision.

After keeping rates on hold as widely anticipated, the RBA dropped its guidance about scope for lower rates.  The AUDUSD moved higher on the hawkish news allowing the currency down under to outperform most of its peers.  The Aussie’s recovery that began at the end of last week has seen it rise nearly 2% over the past three sessions.  The 10-year interest rate differential moved in favor of the AUD over the greenback, pushing the currency higher and helping it form a technical bottom.

The AUDUSD recaptured the 10-day moving average and is poised to test resistance near the August highs at 0.9250.  Support is seen near the recent lows at 0.8950.  Momentum has gained steam with the MACD (moving average convergence divergence) index generating a buy signal as the spread (the 12-day moving average minus the 26-day moving average) crossing above the 9-day moving average of the spread.  The index moved from negative to positive territory confirming the buy signal, as the MACD increasing with a positive trajectory.  The RSI is moving higher and printing near 48 which is in the middle of the neutral range.

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