RBA is to announce it’s interest rate decision tomorrow morning and is expected to remain on hold at +1.50%. Current AUD OIS imply a probability for the bank to remain on hold at 99.59%. Market’s focus is expected to shift to the accompanying statement and we see the case for the bank to have a rather dovish tone as inflation has remained unchanged at +1.9% and household spending seems to continue to be a concern. The government’s budget strategy could help, especially the plans for a possible personal tax cut, however they remain to be seen. Should there be a dovish statement the market may react negatively and the AUD could weaken.
AUD/USD has been trading in a bears’ mrket for the past few months, however seems to be stabilizing near the 0.7575 resistance line in the past few days. We see the case for the pair to continue to trade in a sideways manner for today, with some bearish tones as the market slowly starts to position itself ahead of the RBA interest rate decision. Should the bears take over the pair we could see it breaking the 0.7470 support line. On the other hand should the bulls take the reins, we could see AUD/USD breaking the 0.7575 resistance line and aim for the 0.7680 resistance barrier.