• The Australian dollar could continue its gains as the RBA meeting minutes indicated current interest rates will remain in place for a while longer.
• The minutes of the RBA’s August meeting show that an interest rate cut is unlikely in the near future.
• The US dollar could benefit from some support from caution ahead of the release of the FOMC meeting minutes on Wednesday.

The Australian dollar (AUD) is holding its ground, looking to extend gains against the U.S. dollar (USD) on Wednesday. The strength of the AUD/USD pair was boosted after the minutes of the Reserve Bank of Australia (RBA) August meeting indicated that the cash rate could remain unchanged for an extended period.

The RBA minutes also show the board considered raising interest rates earlier this month before ultimately deciding that maintaining current rates would better balance the risks. RBA members also agreed that a rate cut was unlikely in the near future.

The U.S. dollar (USD) is trying to halt its losing streak as traders grow cautious ahead of the release of the FOMC minutes on Wednesday. Traders also await Federal Reserve Chairman Jerome Powell’s speech in Jackson Hole on Friday.

Daily Market Update: Australian Dollar Remains Strong After RBA Minutes

• Federal Reserve (Fed) Governor Michelle Bowman expressed caution on Tuesday about making any policy changes, citing ongoing risks of rising inflation. Bowman warned that overreacting to individual data could undermine progress already made, according to Reuters.
• China is exploring a up-to-date approach to bolstering its struggling real estate market by allowing local governments to exploit special bonds to buy unsold properties. Local governments have already used more than half of this year’s CNY3.9 trillion ($546 billion) bond allocation, and it’s unclear how much of the remaining funds could be redirected to buying homes if the plan were implemented, according to Bloomberg.
• The People’s Bank of China (PBoC) kept its one-year and five-year lending rates (LPR) unchanged at 3.35% and 3.85% respectively at its August meeting on Tuesday. Any changes in the Chinese economy could have an impact on Australian markets as the two countries are close trading partners.
• Minneapolis Federal Reserve President Neel Kashkari said on Monday that concerns about a weakening labor market would make it appropriate to discuss potential U.S. interest rate cuts in September, Reuters reported.
• Federal Reserve Bank of San Francisco President Mary Daly stressed Sunday that the U.S. central bank should gradually lower borrowing costs, according to the Financial Times. Additionally, Federal Reserve Bank of Chicago President Austan Goolsbee warned that central bank officials should be cautious about maintaining tight policy longer than necessary, according to CNBC.
• RBA Governor Michele Bullock said Australia’s central bank would not hesitate to raise interest rates again to combat inflation if necessary. The comments came just days after the RBA kept interest rates at 4.35% for a sixth consecutive meeting.

Technical Analysis: Australian Dollar Holds Near 0.6750, Aiming for Seven-Month Highs

The Australian dollar is trading around 0.6750 on Wednesday. Daily chart analysis shows that the AUD/USD pair is heading higher in an ascending channel, strengthening the bullish trend. Furthermore, the 14-day Relative Strength Index (RSI) is slightly below 70, supporting the ongoing bullish momentum. However, a further move higher could indicate that the currency pair is overbought, potentially leading to a correction.

On the upside, the AUD/USD pair could test the seven-month high at 0.6798 and then the upper boundary of the ascending channel at 0.6820.

For support, the pair could find support around the lower boundary of the ascending channel that is aligned with the nine-day exponential moving average (EMA) at 0.6670. A break below the nine-day EMA could see the pair test the rebound level at 0.6575 and then the next rebound level at 0.6470.

AUD/USD: Daily Chart