The Australian dollar is almost unchanged in the Tuesday session. Currently, the pair is trading at 0.7640, down 0.07% on the day.
RBA holds the course
There were no surprises from the RBA, which maintained its monetary policy stance at today’s policy meeting. The central bank held the cash rate and the 3-year yield target at 0.10%. The RBA statement made specific reference to housing lending costs, noting concern over the rise in housing prices and low interest rates. The strong recovery by the Australian economy in an ultra-low rate environment has fueled a red-hot housing market, prompting fears of a housing market crash. Australian house prices jumped in March by 2.8%, the highest increase since 1988. Aside from concerns over a housing bubble, the jump in housing prices threatens to add to already high levels of household debt. The statement also said that “the economy is operating with considerable spare capacity and unemployment is still too high.”
The RBA has said that it does not anticipate raising interest rates prior to 2024, when inflation is projected to reach the bank’s target of 2-3%. However, Australia’s economy has been recovering rapidly and it’s entirely possible that inflation could reach this target well before 2024, in which case there would be pressure on the central bank to raise interest rates.
The US dollar has cooled off, as US Treasury yields have retreated. The greenback failed to take advantage of a stellar Nonfarm Payrolls report on Friday, which rose to 916 thousand, up from 379 thousand. With the Biden administration working on a massive infrastructure package, there are expectations that upcoming NFP prints will exceed the 1-million mark, as the US economy continues to gather steam.
- AUD/USD faces resistance at 0.7675. Above, there is resistance at 0.7735
- 0.7543 is the first line of support. It is followed by support at 0.7471
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