"The pace of economic recovery in Australia has surpassed all expectations." This is a quote from the minutes of the RBA's April meeting published today. This phrase is seen through the entire document, which surprised traders with its optimistic rhetoric. However, what is really surprising is that the regulator retained its "dovish" position despite all the optimism. The Australian Central Bank does not intend to raise the rate until 2024 and does not rule out the option of prolonging the stimulus program. Traders could interpret such a controversial release differently – both in favor of the Australian dollar and against it. However, the current situation in the currency market allows buyers of AUD/USD to stay in their place due to the weakness of the US currency. The US dollar showed its vulnerability to major currencies, and the AUD/USD pair is not exempted here.
In general, all Australian releases currently play a secondary role for the Australian currency. The main driver of the pair's growth is the US dollar, so today's minutes served as an additional finale only. Traders only saw positivity (ignoring the "dovish" conclusions) in the published document. In this case, the pair broke through the resistance level of 0.7790 (upper limit of the Kumo cloud on the daily time frame) on the wave of the upward impulse. Given the falling rate of the US currency, the assault on the 0.78 mark is approaching.
Let's get back to the RBA minutes. First, the regulator acknowledged that the Australian economy is recovering at a rapid pace, and it is likely that this trend will not only continue in the second half of the year, but also strengthen. Secondly, they have not expressed concern about the end of the state subsidy program JobKeeper. This was only mentioned briefly, while quite loud comments were addressed to the labor market. In addition, Central Bank members assessed the February data, which really came out as a selection in the green zone. According to the RBA, the published data shows that the pace of job creation in Australia has far exceeded earlier forecasts. At the same time, unemployment has declined to a one-year low, and the indicator of the number of people employed has reached a pre-pandemic level.
In fairness, it should be noted that the April meeting was held before the release of March data. On the one hand, almost all components of this release came out better than expected: the unemployment rate plummeted to 5.6% (such a decline is recorded for the fifth month in a row), and in turn, the growth rate of the number of employed doubled the forecast values: analysts expected to see this indicator at around 35 thousand, but it came out at 70 thousand. However, the problem is that the increase in the number of people employed in March was due solely to the growth of part-time employment, while the indicator of full employment showed a negative result for the first time since September last year. As part-time employment surged by 90,000, the full-time component declined by 20,000. Due to this, it can be assumed that the RBA members will pay attention to this negative circumstance at their May meeting, which will take place in exactly two weeks.
However, such prospects currently do not bother investors. The dollar's continuous decline moves the AUD/USD pair up, allowing us to ignore many negative factors. After all, despite all the positivity of the above-mentioned minutes, the Reserve Bank of Australia came to disappointing conclusions: the Central Bank will maintain an accommodative policy until the goals for inflation and employment are reached, that is, approximately until 2024 (but not before the designated date). At the same time, the Central Bank is ready to increase the volume of bond purchases, if it is necessary for progress towards target levels. In my opinion, the Australian regulator will only strengthen the "dovish" rhetoric after the release of March data on labor market growth.
But as mentioned above, all these arguments have recently faded into the background. The US dollar index fell into the area of the 90th figure, updating its 6-week low during the Asian session on Tuesday. The US currency was hit by a wave of sell-offs amid general skepticism about the prospects for tightening the Fed's monetary policy. If the national currency enjoyed support from macroeconomic reports at the beginning of the year, then now, these fundamental factors do not work: Fed members unanimously argue that they will not curtail QE and even more so raise the interest rate in response to the growth of key indicators. In their opinion, such dynamics will be temporary, so the Fed's presence in the near future is needed.
Today, buyers of the AUD/USD pair had the opportunity to update the monthly price high due to the general weakness of the US dollar. At the same time, it is necessary to take into account that the Australian dollar has come to the borders of the 0.78 level. For the last two months, the AUD has assaulted the level of 0.7800 about ten times, but it has failed to consolidate in this price area in the end. This suggests that long positions are risky at the moment, as the pair has reached a fairly strong price barrier. It is recommended to open longs only if the upward momentum does not fade when crossing the level of 0.7800 (there is a risk that traders will start taking profits in this price area). In general, the main upward target is set at 0.7860 – upper line of the Bollinger Bands on the weekly time frame.