AUD/USD – RBA To Maintain Policy At Status Quo

#OPINIONLEADER#

 DEC 6, 2021

• RBA not expected to make a move in upcoming meeting
• Focus is on the central bank’s view on Omicron and its impact
• Pessimistic tone may send AUD/USD lower

Chart 1: AUD/USD D1 chart

The Reserve Bank of Australia (RBA) is scheduled for a monetary policy meeting tomorrow. It is pretty much certain that the Australian central bank will keep interest rate unchanged at 0.10% since inflation target has not yet been met. Quantitative easing (QE) will also remain at the current pace of A$4 billion per week since the RBA has made it clear back in the September’s meeting that this pace will remain until at least February 2022 before further evaluation will be carried out. With that, no change in monetary policy is expected from the central bank.

Nonetheless, tomorrow’s meeting is the first ever since the COVID Omicron variant has been discovered. And so, it will be crucial to hear what the RBA has to say about the potential impact that can be caused by this variant on the Australian economy and monetary policy. Specifically, pay attention to any possible amendments to the February 2022 evaluation of QE tapering pace. Any signs of pushing the timeline backwards may lead to a weakening in the Australian dollar.

At the moment, AUD/USD is trading at a 1-year low of 0.70. The renewed fear of COVID has recently led to the weakening of AUD/USD. If the RBA were to send out a pessimistic tone, AUD/USD may break below the 0.70 handle, presenting selling opportunities.

Trade Setup for AUD/USD (D1)

Sell Stop at 0.6970

Upcoming news that may impact price movement of AUD/USD

07 December – Reserve Bank of Australia monetary policy decision announcement at 1130 (GMT+8)

10 December – Reserve Bank of Australia Governor Lowe spaeking at 0600 (GMT+8)

10 December – U.S. CPI m/m data release at 2130 (GMT+8)

10 December – U.S. Preliminary UoM Consumer Sentiment data release at 2300 (GMT+8)

15 December – U.S. retail sales data release at 2130 (GMT+8)

16 December – Federal Reserve monetary policy decision announcement at 0300 (GMT+8)

16 December – Federal Reserve monetary policy press conference at 0330 (GMT+8)

16 December – Australian employment data release at 0830 (GMT+8)

16 December – Australian flash PMI data release at 0600 (GMT+8)

16 December – U.S. flash PMI data release at 2245 (GMT+8)