On Tuesday, during the Asian session, RBA will announce its interest rate decision and is expected to remain on hold at +1.50%. Currently, AUD OIS imply a probability for the bank to remain on hold at 99.67%. As no interest rate movement is expected the market’s focus could shift to the accompanying statement. Considering the unemployment rate rising and reaching 5.6%, despite the banks predictions and the wage price index growth rate remaining at low levels, it could be the case that the bank will issue an accompanying statement with a rather dovish tone. Should there be a dovish tone in the accompanying statement we could see the AUD weakening.
AUD/USD traded in a sideways movement on Friday and today during the Asian session broke the 0.7575 resistance level, now turned to support. The pair could trade in a bullish market today as the AUD got a boost from the release of Australia’s retail sales growth rate. Also the US factory orders growth rate, to be released in the American session, could weaken the USD in our opinion. The pair could prove sensitive to RBA’s interest rate decision tomorrow during the Asian session as the market could start positioning itself ahead of the release. Should the bulls take over we could see the pair breaking the upper boundary of the sideways movement at 0.7600 and aim for the 0.7680 resistance level. Should the bears take the reins we could see the pair breaking the 0.7575 support line and aim for the 0.7470 support area.
RBA decided to leave its cash rate at 1.50%, as was widely expected. The accompanying statement had a rather dovish tone with a remark for the inflation rate remaining low for some time and picking up gradually over time. Other comments stated that the outlook for household consumption remained a source of uncertainty and that the rising AUD could lead to a slower economic pick-up. Overall we see the case for a low, neutral impact on the AUD, which could be weakened by the comments on a longer basis.
AUD/USD traded in a sideways manner in the past couple of days around the 0.7680 support line. We see the case for the pair to trade in a sideways manner however with some bearish tones in the next couple of days, unless the greenback weakening due to fears of a possible trade war, weighs in. The argument for a more bearish mood in the long run is supported also by the daily chart where the pair trades steadily below the downward trend-line intercepted since the 26th of January. Should the pair come under selling interest we could see it breaking he 0.7680 support line and aim for the 0.7575 support barrier. Should it come under buying interest we could see it aiming or even breaching the 0.7820 resistance line.
RBA decided to remain on hold during the Asian day, at +1.5%, as the market expected, hence the reaction of AUD was muted. The accompanying statement stated that the inflation rate is to remain low for some time and that household consumption remains a source of uncertainty while the appreciating exchange rate could slow economic activity and inflation. The before mentioned comments give a neutral to dovish tone to the statement, especially the bank’s view that the inflation is to remain low for some time, which implies that it may not enter the banks inflation target range of 2.00%-3.00%. Prospects for a rate hike in 2018, seem to be further away after the announcement and the issuing of the statement. AUD had a small reaction of 15 pips in total, however the AUD could weaken in the long run.
AUD/USD traded in a sideways manner in the past couple of days, well between the 0.7820 resistance line and the 0.7685 support line. We see the case for the pair to continue to trade in that manner with some bearish tones maybe for the next few days. Should the bulls take the reins we could see the pair breaking the 0.7820 resistance line and aim for the 0.7925 resistance hurdle. Should the bears have the upper hand, the pair could break the 0.7685 support line and aim for the 0.7575 support barrier.