RBA’s Interest Rate Decision

On Tuesday, during the Asian day, RBA’s interest rate decision is to be released. The bank is expected to remain on hold at +1.5%. AUD Overnight Index Swaps seem to strengthen the argument for the bank to remain on hold as they currently imply a probability of 99.64%. Inflation rate seems also to strengthen the argument despite its recent slight acceleration to +1.9% yoy from previous reading of +1.8% yoy, as it remains below the bank’s target range of +2.00% to +3.00%. Hence, market focus may shift to the accompanying statement. It may contain an upbeat economic outlook, however it would be interesting to see any remarks concerning household consumption which was cited as continuing source of uncertainty view and the private debt levels. The overall tone of the statement could be neutral to dovish and could weaken AUD. Please note that the effect on AUD could be somewhat muted as the market may expect the outcome.

AUD/USD has traded in a rather sideways manner in the past few days, between the 0.7685 support line and the 0.7820 resistance line. We see the case for the pair to continue to trade in a sideways manner with some bearish tones. Should the bears take the driver’s seat we could see the pair driving south and breaking the 0.7685 support line and aim for the 0.7575 support barrier. Should the bulls have the upper hand, we could see the pair breaking the 0.7820 resistance line and aim for the 0.7935 resistance hurdle.