07.07.202013:07 Forex Analysis & Reviews: AUD/USD. RBA meeting and COVID-19 outbreak in Victoria

The Australian dollar, paired with the US currency, made an attempt again to storm the 70th figure during the Asian session on Tuesday, but expectedly retreated from its positions. The results of the July meeting of the RBA could not inspire the buyers of AUD/USD, while news about the outbreak of coronavirus in the Australian state of Victoria increased pressure on the AUD. The Australian currency remained in the price niche of 0.68-0.69 again in anticipation of another news item. Meanwhile, sales of the AUD/USD pair are still relevant and will remain relevant until Australia and China resolve the political conflict (which has only recently worsened).

But let's start with the RBA. In general, investors did not expect anything interesting from the July meeting, given the previous statements by regulator Philip Lowe and his deputies. The market had no doubt that the Central Bank would keep all the parameters of monetary policy in its original form, and the rhetoric of the Central Bank members would not differ from the rhetoric of the June meeting. The main intrigue was what actions the Central Bank could take in the fall, given the uncertainty about the fate of the state's stimulus program. The fact is that the fiscal incentives in September, which were introduced in the spring in response to the coronavirus crisis, expire. RBA deputy head, Guy Debelle, called on Canberra last week to constantly stimulate the economy. He admitted that if the government decides to roll back the stimulus package, the Australian economy will face "inevitable problems."

However, the Reserve Bank of Australia did not focus on this during the July meeting. This is partly due to the fact that members of the government are currently considering the extension of the above incentives - they will announce their decision on this issue in a few weeks. Therefore, the Central Bank also took a wait-and-see attitude, deciding not to get ahead of events.

Generally, the text of the accompanying statement repeated the rhetoric of the accompanying statement of the previous June meeting almost word for word. The regulator reiterated that the accommodation policy will be supported "as much as needed", and the rate will remain at the current level until "steady progress in inflation and the labor market is achieved". RBA members maintained the target level of yield on three-year bonds and reminded them of their readiness to increase bond purchases again if necessary.

At the same time, the Central Bank reiterated once again the issue that the "coronavirus strike" was not as severe as previously predicted, but the Australian economy still needs support from fiscal and monetary policies, as it is still going through a "very difficult period" . Regulator members also complained that household spending stabilized at a "new level" - Australians began to spend less on travel and entertainment (that is, on the service sector), but at the same time, increased spending on household goods and food. Retail trade in food products outside supermarkets grew by 33% compared to the same week last year, and by 21% in supermarkets.

But in general, the Reserve Bank did not announce anything sensational. The July meeting was "passing" - the Central Bank maintained a wait-and-see attitude until at least August 4, when the next meeting of the regulator's members will take place.

And if the results of the Central Bank meeting did not affect the mood of investors, then the other fundamental factors put pressure on the AUD/USD pair. First, it became known that in the state of Victoria, 127 new cases of infection with coronavirus were recorded per day - this is a record figure since the beginning of the pandemic. Prior to this, no more than 99 new cases were recorded there daily for almost three weeks. The authorities reacted quite radically to this surge in incidence - they closed the borders between the two most populated states - Victoria and New South Wales themselves.

A second reason for the background pressure on the AUD is the ongoing political conflict between Australia and China. Let me remind you that at first, relatively minor economic sanctions were followed by China, but then the conflict also appeared in other areas - in particular, representatives of Beijing called on Chinese students not to return to Australian universities "because of racist incidents." Thus, it became known the other day that many young people listened to the "recommendations" of the authorities and refused to continue their studies at Australian universities. At the same time, the parties do not plan to sit down at the negotiating table in the near future: according to representatives of the Australian Foreign Ministry, Chinese colleagues do not respond to their respective requests. In early July, Australian Prime Minister, Scott Morrison, said relations between the two countries "remain extremely difficult."

Such a fundamental background does not contribute to the growth of the AUD/USD pair at least in the context of breaking through the key resistance level of 0.7000. Therefore, short positions with the main target at 0.6890 are still relevant for the pair. This support level corresponds to the midline of the Bollinger Bands indicator, which coincides with the Tenkan-sen and Kijun-sen lines on the daily chart.