Aussie draw-out its second day low on today market session after the release of RBA minutes. The Aussie pair reacted to the recent RBA monetary meeting.  Recent RBA minutes highlight the impact of the corona virus on the Oz economy, saying that “recent eruptions of the delta variant of Covid-19 have hampered recovery”.

In Monetary meeting the Board member discussed “Recognizing that fiscal policy is a more appropriate instrument than monetary policy for providing support in response to a temporary, localized reduction in incomes, members welcomed the substantial fiscal measures that had been announced. Given these considerations, the Board reaffirmed the previously announced change in the rate of bond purchases. That said, the bond purchase program will continue to be reviewed in light of economic conditions and the health situation, and their implications for the expected progress towards full employment and the inflation target. 

In any event, the Board will not increase the cash rate until actual inflation is sustainably within the 2 to 3 per cent target range. The central scenario for the economy is that this condition will not be met before 2024. Meeting this condition will require the labour market to be tight enough to generate wages growth that is materially higher than it is currently. The decision by RBA board committee reaffirmed the existing policy settings. “Maintain the cash rate target at 10 basis points and the interest rate on Exchange Settlement balances of zero per cent. Maintain the target of 10 basis points for the April 2024 Australian Government bond. Continue to purchase government securities at the rate of $5 billion a week until early September 2021 and then $4 billion a week until at least mid November 2021”.

On the other hand Asian shares saw pressure upon anxiety over the spike in the Delta variant of COVID-19 infections and turmoil in Afghanistan eclipsed overnight strength on Wall Street. The continued spread of new COVID-19 variants and the impact on the global economy have shaken market confidence. Investors were also watching news from Afghanistan, where thousands of civilians desperate to flee the country thronged Kabul airport after the Taliban seized the capital and declared the war against foreign and local forces over.  Disappointing Chinese economic data, anxiety over developments in Afghanistan and concerns about Delta variants boosting the safe heaven into demand.

Sydney is the epicenter of Australia’s Covid third wave, has seen a series of epidemics and threatens to push the country’s A$2 trillion ($ 1.47 trillion) economy into its second recession in several years.

When it comes to risk catalysts, Delta Covid variant fears receive great attention due to their strong anti-vaccine properties and low jabbing. For the fresh impulse US Retail Sales for July will be the key followed by Jerome powell speech will be the risk catalysts for the market direction.

AUD/USD 4 Hour Chart:

Support: 0.7313 (S1), 0.7289 (S2), 0.7259 (S3).

Resistance: 0.7366 (R1), 0.7396 (R2), 0.7419 (R3).

Amidst all the catalysts along with RBA minutes pushing the Aussie pair into downtrend. We expect a bearish trend for AUD/USD.