The appetite for risk resurfaces; AUD / USD, Aussie closes after RBA

Key points of the article:

• RBA leaves policy unchanged, appetite for risk arouses
• AUD / USD: Australian dollar rebounds sharply after RBA

Currency Table-Time Horizon: Daily

RBA leaves policy unchanged, appetite for risk arouses

The dollar remains stable, as Treasury yields have moved away from their lowest level of last week (2.5 months), following the news of the first observations indicating that people with the Omicron COVID strain -19 exhibited only mild symptoms. The appetite for risky currencies was rekindled, investors being reassured.

Long dollar positions climbed for the second week in a row to their highest level since June 2019, according to US CFTC data, while bearish euro positions increased to their highest level since March 2020.

Tonight, the Reserve Bank of Australia kept the bank rate unchanged at a historically low 0.1% for the 13th consecutive month, as expected, saying inflation had risen but remained low in sub- underlying.

The Australian bank members noted that inflationary pressures are weaker than in many other countries, against a backdrop of modest wage growth. The board reaffirmed that it will not hike the discount rate until Australia’s real inflation is durably within the target range of 2% to 3%. “For that to happen, the job market will need to be tight enough to generate significantly higher wage growth than at present. It will likely take some time and the board is prepared to be patient.”

The committee said it will continue to buy government bonds at the rate of AU $ 4 billion per week until February, when it will review the transaction. Regarding the Omicron strain, the bank said it was unlikely to derail the economic recovery.

AUD / USD: Australian dollar rebounds sharply after RBA

The Australian dollar strengthened on contact with strong support at 0.6990. Without however calling into question for the moment the negative trend which prevails under the moving averages at 13 and 34 periods. Going beyond the shortest average would make it possible to rally the polarity line at 0.7170 which will be a determining obstacle for the future. The rebound of the RSI argues in this direction.

Failure on this last level would expose the Aussie to a return to support which would be weakened.

Evolution of the Australian dollar against US dollar in daily data:

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