The Australian dollar was little changed after the Reserve Bank of Australia published the minutes of its August meeting. AUD/USD was treading water at around $0.7870 following the release. However, in late Asian session the Aussie started to tumble amid a broad-based USD strength. The minutes revealed that the central bank was quite optimistic regarding consumption growth, arguing that “rising employment and stronger household income growth were expected to support consumption growth”. However, the RBA noted that, despite a strengthening in economic condition, further appreciation of the AUD could derail the ongoing economic recovery as well as the pick-up in inflation.
Therefore, we expect the RBA to maintain its neutral stance as the Aussie started to reverse gains. However, further strength in the Australian currency may trigger verbal interventions from Governor Lowe.
AUD/USD slid as ow as 0.7825, the lowest level since July 18th. The currency is slowing grinding towards the next support that lies at around 0.7784-0.7787 (Fibonacci 38.2% on May-July rally and low from July 18th).
By Arnaud Masset