AUDUSD Declines Ahead of the RBA Monetary Policy Decision Meeting

Jul 5, 2021 05:52 PM ET
AUDUSD Declines Ahead of the RBA Monetary Policy Decision Meeting
  • The RBA’s monetary policy meeting is expected on July 6, 2021, with Australia’s inflation at 1.1% and the cash rate at 0.1%. 
  • Houses in Australia’s private sector decreased to 13,571 after attaining a historic high in April 2021. 
  • Total vehicles sold in the US declined to 15.36 million from a previous record of 17.05 million.

The AUDUSD pair traded at a -0.65% price change in the week leading to July 2, 2021. The Australian dollar lost against the US dollar after Australia’s trade balance failed to beat consensus estimates by 3.19% at A$9.681 billion.

Australia’s trade balance (May 2021)

Australia’s trade balance (May 2021)

However, it had risen above the previous balance reading at A$8.157 billion, indicating an increase of 18.68%. Imports rose by 3% to A$919 million from an earlier decline of 3%, while exports increased 6% in May 2021 to A$2.443 billion from 3%

Price index

The commodity price index (for June 2021) also surged 49.1% (YoY) from an earlier position of 40.7%. According to the Reserve Bank of Australia (RBA), the bulk commodities that include iron ore, export prices of LNG, thermal coal, and cooking oil had their commodity price index rose by 7.7% in June 2021.

Imports of gasoline declined 5.5% in April 2021 (MoM) to stand at 4.453 million barrels. Covid-19 restrictions, especially in the transport industry, also forced driving activities to be cut by 20%. 

Q1 2021, saw Australia’s GDP rise 1.8%. The RBA is expected to meet on July 6, 2021, to decide on Australia's monetary policy with inflation at 1.1% and the cash rate at 0.1%. On a seasonally adjusted basis, approvals for dwellings declined 7.1% in May 2021 with houses in the private sector decreasing by 10.3%. The value of non-residential buildings in Australia rose 28.5%. 

Dwellings approved in Australia (May 2021)

Dwellings approved in Australia (May 2021)

With the exclusion of houses, dwellings in the private sector surged 1.2%. Houses in the private sector decreased to 13,571 after attaining a historic high in April 2021. 

Online retail sales

Total online sales in Australia declined 4.8% in May 2021 (MoM) after decreasing by 4.1% in April 2021. 

Online sales in Australia

Online sales in Australia

These retail sales only surged in March 2021 at 2.0% as retailers continue adapting to different sales channels during Covid-19 restrictions. Despite beating estimates at 56.0, services PMI declined to 56.8 from 58.0. Job advertisements by the ANZ (MOM) decreased to 3.0% from a high of 6.8%.  

The AUDUSD pair was trading at 0.7521 as of 3:12 am (GMT) on July 5, 2021, declining 0.05% from the previous session open at 0.7523. 

US employment rate

The US dollar was boosted by the decline in the unemployment rate (U6) to 9.8% from a previous record of 10.2%. Non-farm payrolls in June 2021 beat estimates at 850,000, rising from 583,000 in May 2021. Government payrolls also increased to 188,000 in June 2021 from a previous record of 67,000. 

June 2021 saw car sales in the US decrease 10.78% to 3.56 million from a high of 3.99 million. Truck sales stood at 11.86 million, bringing the total vehicles sold to 15.36 million from a previous record of 17.05 million. 

Technical analysis

The AUDUSD pair formed a diamond pattern after the price had seen a steep fall since June 11, 2021. 

AUD/USD chart

In response to the diamond bottom pattern, the pair's price may start a short-term bullish reversal. The uptrend may reach the key level of 0.7669, as it is supported by a slow increase in the buying volume. The 14-day RSI has also moved above the oversold region and has settled at 35.75, showing increased buying pressure. The pair may also continue the bearish trend and hit lows of 0.7474 if the pattern breaks downwards.

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