AUD/USD forms cup and handle ahead of Australia retail sales

The AUD/USD retreated on  Tuesday as the market digested the latest Reserve Bank of Australia (RBA) minutes. It is trading at 0.7770, which is slightly below the intraday high of 0.7815 as traders wait for the preliminary Australian retail sales numbers.

RBA in no hurry to tighten

The Australian government responded to the coronavirus pandemic relatively well. The country had more than 29,000 cases and less than 1,000 deaths, which was a relatively good performance. It achieved this by locking down its border and issuing stay-at-home orders to limit the spread. 

In a bid to cushion the economy, the government announced a major stimulus package that included the job keeper program. The RBA also lowered interest rates to zero, launched a quantitative easing program, and yield curve control.

The bank is not in a hurry to tighten the monetary policy. This is according to the minutes of the last meeting that were published today. Members of the monetary policy committee (MPC) said that they will hold interest rates at the current level until the unemployment rate and inflation improve. This could take a few more months or years.

The AUD/USD is also retreating as the market waits for the Australian retail sales that will come out tomorrow morning. Economists expect that the sales rebounded in March as the country continued to reopen. This trend will continue as the country reopens its travel bubble with New Zealand. 

The pair also retreated because of the overall dollar strength. The dollar index rose slightly today as US bond yields rose. The yield on the 10-year bond yield rose by 0.50% to 1.60 while the 30-year yield rose by 0.30% to 2.30%. 

AUD/USD technical forecast

The AUD/USD pair declined to 0.7774, which was slightly below the intraday high of 0.7816. On the four-hour chart, the pair is forming what looks like a cup and handle pattern, which is usually a sign of bullish continuation. It is also being supported by the 25-day and 15-day moving averages and the Stochastic Oscillator. The dots of the Parabolic SAR are also below the price, which is a bullish factor. Therefore, the pair may resume the bullish trend, with the next target being at0.7850.