November 29, 2022

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TD flag a risk of AUD/USD dropping to circa 0.7245

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TD preview the Reserve Bank of Australia monetary policy meeting on July 6 2021.

Noting the revered imposition of lockdowns across Australia that have “now stretched to nearly half the population” TD go on with implications for the RBA:

  • The country’s relative sluggishness on the vaccine front has fueled some speculation the RBA could deliver a dovish surprise at next week’s policy decision. 
  • Policymakers are due to decide on whether to extend its YCC target to the November 2024 bond and the shape of their QE program going forward.
  • We continue to expect the RBA will hold to the current April 2024 maturity target and to a QE3 program of ‘up to A$100bn’. We think this will come in two clips of A$50bn with purchases spread out over five months for each.

On the Australian dollar, TD add:

  • We note that AUDUSD’s post-FOMC bounce from 0.7475 ran out of steam at 0.7617 last week.
  • With the aussie now back below the 200-DMA (0.7565), we think near-term risks probably still remain skewed to the downside.
  • We think the next natural support zone should arise around 0.7415, but would expect a more significant floor to be found around 0.7245.

Bolding is mine. 0.7245 …. yowza …. eyes on the NFP later this week, if it strong it’ll likely be another boost for the USD and see AUD slide. 

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