Delta Spread To See RBA Pause Tapering, Sending AUDUSD To Fresh Cycle Lows

This morning’s edition of the minutes of the RBA’s July board meeting, where it announced a decline in QE, showed an emphasis on flexibility around its decision to decline.

Given the high degree of uncertainty about the economic outlook, members agreed that there should be flexibility to increase or decrease weekly bond purchases in the future, as justified by the then state of the economy.

The inclusion of this leadership along with the ongoing risks surrounding the spread of the Delta variant in other Australian states seems to see the RBA reverse its declining July decision at its August meeting.

Instead, the RBA will continue to buy QE bonds at a rate of US $ 5 billion / week after the current cut ends in September, before finally starting to decline in November 2021.

The likely delay in a downturn has given another blow to the AUDUSD, already under pressure from a resurgent U.S. dollar, a sharp deterioration in risk sentiment and lower commodity prices.

Technically, after Monday’s break and close below critical support .7420 / 00 area, the AUDUSD appears at risk of a deeper correction to .7200c and possibly to medium term .7020 / .6990 area (coming from some lows in September and November 2020).

Recent lows in the .7400 / 20 area should provide initial resistance, with a break and consecutive daily closings above the 200-day ma at .7584 needed to indicate that the correction is complete, and the higher trend has resumed.