The Australian dollar, also known as the Aussie, rose nearly 1% Tuesday, following a strong Monday as sentiment improved notably in the markets. At the same time, the AUD/USD pair was supported by the latest Reserve Bank of Australia decision.
RBA moving the Australian dollar
Earlier today, the Australian central bank left monetary policy unchanged, with the primary interest rate kept at 0.1% , as widely expected. Moreover, the board decided to continue to Moreover, the board decided to continue to purchase government securities at the rate of 4 billion USD a week until at least mid-February 2022.
At its conference following the decision, the RBA reiterated that it would not increase the cash rate until actual inflation is sustainably within the 2% to 3% target range.
Additionally, governors think that the omicron strain is a new source of uncertainty, but it is not expected to derail the recovery. With that in mind, the economy is likely to return to its pre-delta path in the first half of 2022.
Recently, the Australian dollar has benefitted from the fresh policy stimulus in China and the heightened speculation that the RBA could bring an earlier end to their QE program next year.
economists at MUFG Bank think.
From other news, the Chinese trade balance in USD worsened to 71.72 billion in November, down from 84.54 billion in October. Exports slowed to 22% from 27% previously, while imports to the country rose sharply to 31.4%, up from 20.6% in October.
During the US session, nonfarm productivity and unit labor costs data for the third quarter will be released, but they usually don’t move the markets.
Short-term charts now look bullish
The Aussie is now testing the significant resistance of previous lows at 0.71, where the short-term downtrend is also located. Should the pair close above this level on a daily chart, we could see another leg higher, targeting 0.7170.
Furthermore, the MACD indicator is close to sending a bullish signal from a profoundly negative zone, reinforcing the bullish narrative. The Aussie is also oversold on the daily chart, setting the stage for a possible reversal.
Sentiment in the markets seems bullish as fears from the Omicron variant dissipated quickly, helping commodity-linked currencies to erase some of the losses suffered in November.
Alternatively, if bears defend the mentioned resistance near 0.71, we might see another decline to the psychological zone at 0.70.