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.

RBA remains on hold

RBA decided to remain on hold as it was widely expected by the market and kept its interest rate at +1.50%. The accompanying statement had an upbeat tone with comments for inflation being likely to remain low for some time, a gradual pick up of inflation is expected and it should reach a bit above +2.0% in 2018. The statement also spotted as continuing source of uncertainty the outlook for household consumption. Specifically, it mentioned that household incomes are growing slowly and debt levels are high. AUD/USD was practically not influenced by the RBA decision indicative of the neutral effect as the market was expecting the outcome.

AUD/USD began to trade yesterday in a sideways manner with a bullish tone, however dropped heavily as the later on during the US session breaking the 0.790 support level. The pair could continue to trade with some bearish tone, however we see the case for the pair to stabilize somewhat later on as the Relative strength index is already below 30, possibly signaling an overcrowded short position. Should the bears continue to have the upper hand we could see it breaking the 0.7782 support level and aim for the 0.7683 support barrier. On the other hand should the bulls take the driver’s seat, we could see them drive the pair beyond the 0.7900 resistance level, aiming for the 0.8000 resistance hurdle.