RBA minutes dovish, AUD rallies above 78

AUD/USD is currently trading at 0.7802, up 0.63% on the day. The pair has pushed above the 0.7800 level for the first time since March 18th. Retail sales will be released on Wednesday (1:00 GMT), with the forecast calling for a solid gain of 1.0%.

Australian dollar remains red hot

The Australian dollar continues to take advantage of a sluggish US dollar, as the currency is up close to 1% this week. The Aussie has looked sharp in April, posting gains of 2.7%.

The US dollar remains under pressure, as the market appears to be heeding the message from the Federal Reserve that any increase in inflation will be only temporary. This has led to a significant reduction in expectations of a rate hike in the near future. With the US economy showing renewed strength, pent-up demand is expected to lead to higher inflation. This had raised speculation that the Fed might reconsider its dovish stance in order to prevent the economy from overheating. However, Fed policymakers have sought to dampen concerns about inflation and have indicated that low rates aren’t going anywhere for the near future.

RBA minutes reaffirm dovish stance

There were no nuggets in the RBA minutes of the April policy meeting. The board stated that it remained committed to supporting the economy and would maintain a “highly supportive” monetary stance until the bank’s employment and inflation targets were met. Members reiterated that the cash rate would remain at 0.10% for “as long as necessary” and left open the window for further bond purchases. The QE programme is currently set at AUD 200 billion.

Two key areas that the markets are focused on are inflation and the housing market. Here too, the minutes had little for the market to digest. Members said that inflation remains low and this was not expected to change for several years. As for the surge in housing prices, the minutes stated that the bank was “carefully” following house borrowing levels.

Although the RBA minutes may not have provided any hints about tighter policy, the Australian dollar has posted strong gains on the day, which are likely due to technical factors.

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AUD/USD Technical

• As AUD continues to move higher, it is approaching the March high of 0.7849. Above, there is resistance at 0.7976. This is closely followed by 0.8009, which was the February high.
• On the downside, there is support at 0.7626. Below, we find support at 0.7519

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