The RBA noted the economic recovery is gaining traction, “Household consumption is rebounding strongly and the outlook for business investment has improved,” and that the Omicron variant was not expected to derail the recovery.
Notably, the forward guidance in the last paragraph was a truncated version of the one from the November statement and simply said, “This is likely to take some time, and the Board is prepared to be patient,” opening up the possibility for an early rate rise.
The cautiously optimistic tone around the re-opening of the Australian economy combined with the modification to the last paragraph provides the interest rate market with some unexpected encouragement that the RBA will lift interest rates earlier than expected.
Post the statement, the AUDUSD has rallied about 16 pips from .7058 to a high of .7075, tentatively building on the recovery that commenced overnight on better risk sentiment and following a cut by China to the Reserve Ratio Requirement (RRR).
Technically, providing the AUDUSD holds above the critical .7000c/.6990c support level, a stronger recovery back towards resistance at .7170/80 is possible to work off extreme oversold readings as viewed on the RSI indicator below and to reflect the RBA’s subtle shift.
A move above .7170/80 would then likely trigger a more robust recovery as medium-term trading accounts move to cover shorts established on the sell-off from the late October .7555 high.