AUD/USD on three-week highs ahead of RBA minutes

Australian dollar was trading close to three-week highs against its US counterpart on Monday, following the disappointing new auto sales, as the lack of clarity over the future of Federal Reserve Banks stimulus continued.

AUD/USD reached its highest point on Monday at 0.9232 at 2:20 GMT, also the pairs highest since July 29th, after which consolidation followed at 0.9206, still up by 0.24% for the day. Support was expected at August 15th low, 0.9058, while resistance was to be met at July 29th high, 0.9318.

Earlier on Monday the Australian Bureau of Statistics reported that new auto sales dropped by 3.5% in July on a monthly basis, following the 3.6% increase in June, as the latter was a revision down from a 4.0% increase previously. In annual terms, sales of new automobiles rose by 3.0% in July, after the 6.9% gain a month ago.

The Reserve Bank of Australia (RBA) said in its quarterly policy outlook statement on August 9th that countrys Gross Domestic Product will grow 2.25% in the year to December 2013, compared with the 2.5% prediction made three months earlier. The central bank is submitting signals that further benchmark interest rate cuts “would require a material deterioration in the outlook, beyond that embodied in the Statement on Monetary Policy,” Kieran Davies, the chief economist at Barclays Plc in Sydney, wrote in a research note today, cited by Bloomberg. RBA reduced its benchmark to a new record low level of 2.5% on August 6th, while some traders saw a 54% probability that the central bank will lower interest rates again by the end of the year. A week ago the chances of such action were 64%.

Meanwhile, market participants awaited the release of the minutes of Federal Reserve Bank’s July meeting, scheduled on Wednesday, as it may provide clues on when the central bank may begin tapering its stimulus program. Policymakers will probably begin to pare back the central bank’s bond-buying program in September, according to 65% of experts surveyed by Bloomberg. Such expectations were boosted after on August 15th a report showed that the weekly initial jobless claims in the United States decreased in number to their lowest in almost six years.

Elsewhere, the Aussie was trading lower against the kiwi dollar, as AUD/NZD cross was losing 0.29% to 1.1307 at 8:18 GMT. Australian dollar has gained 0.5% during the past week, reducing to 9.5% the drop it recorded over the past six months, as this makes the Aussie the worst performing currency among the ten developed-nation currencies, tracked by Bloomberg Correlation-Weighted Indexes.