FX.co ★ AUD/USD. RBA's optimistic minutes, JobKeeper scheme and Lowe's pessimism

The Australian dollar received a little support from the minutes of the Reserve Bank of Australia during the Asian session on Tuesday. The minutes of the last central bank meeting turned out to be unexpectedly optimistic against the backdrop of weak macroeconomic reports and the outbreak of coronavirus in the Australian state of Victoria. This fact made it possible for AUD/USD bulls to go back to the area of the 70th figure and test the resistance level of 0.7040 (the upper line of the Bollinger Bands indicator on the daily chart). But further growth prospects look dim, despite the weakness of the US currency and the general interest of traders in risky assets. Many fundamental factors prevent the aussie from developing a large-scale offensive against the greenback – especially since the pair has reached the upper ceiling of the price band, within which it has been trading for the second month. Therefore, long positions look unreliable now: it will be difficult for bulls to gain a foothold in the 70th figure, given the contradictory fundamental background for the aussie.

But let's start with the minutes of the RBA's July meeting. The main message of this document is to maintain a wait-and-see attitude. Members of the regulator concluded that there is no need to adjust the current parameters of monetary policy. The RBA actually ignored the outbreak of coronavirus in one of the largest states in Australia, and did not focus on this fact.

However, in today's speech, RBA Governor Philip Lowe was already so optimistic. The fact is that the July meeting was held before the release of the labour market data for June, which reflected the weak pace of economic recovery. Therefore, at the moment, the RBA minutes does not look as relevant relative to Lowe's recent rhetoric.

Let me remind you that instead of the expected growth to 7.2% (from the previous value of 7.1%), the unemployment rate unexpectedly rose to 7.4% in June. The hidden unemployment rate was 11.7%, and the total number of unemployed almost reached one million people – this is the highest in the history of the study, that is, since 1978. As for the indicator of growth in the number of employed, it immediately jumped to 210,000 (with a forecast growth of 106,000). Although this is a strong result at first glance, the overall picture is not as rosy when you look at the indicator in more detail. The positive dynamics of employment growth in December was only due to the increase in part-time employment – this component jumped by 249,000. While full employment showed a negative trend, decreasing by 38,000. This trend may negatively affect the dynamics of wage growth, as full-time positions tend to offer a higher level of wages and a higher level of social protection.

During his speech today, Lowe drew attention to this fact, pointing to "cross-currents in the labour market." In addition, the RBA governor commented on the government's latest decisions regarding the extension of incentive programs. Let me remind you that yesterday the prime minister of Australia announced that the JobKeeper and JobSeeker schemes will be extended after September. But subsidies will be paid at a reduced rate and under stricter criteria – so that support is provided only to those who, according to the government, really need help. For example, the amount of the subsidy will depend on whether the employee is working full-time or not. Given the structure of the June increase in employment (a sharp rise in part-time employment), it can be concluded that the incomes of many working Australians will remain at a low level. This fact was also stated by Lowe, adding that "the unemployment rate this year is likely to grow, and government payments will decrease."

The coronavirus situation in the Australian state of Victoria also exerts background pressure on the aussie. This region is the most affected by the pandemic: due to the difficult situation under COVID-19, the region has closed its borders with other states of Australia. Over the past day, 387 new cases of infection were registered there, and at least 200 cases of COVID-19 were reported there in previous days.

All this suggests that the growth of AUD/USD should still be considered as a reason to open short positions. The resistance level is located at 0.7040 - this is the upper line of the Bollinger Bands indicator on the daily chart. Buyers have repeatedly tried to overcome this target since the beginning of June, but to no avail. Therefore, you can consider sales while aiming for 0.6935 in this price area – this is the average line of Bollinger Bands on the same timeframe.