AUD not moved by RBA’s interest rate decision

As was widely expected RBA remained on hold, keeping interest rates at +1.50%. The accompanying statement had a neutral to dovish tone, keeping the same arguments more or less as in the previous decision. Dovish comments included that wages growth remains low and that headline CPI rate to be lower than earlier expected in 2018, however on the bright side, inflation is forecasted to accelerate more in 2019/20 than what was previously expected. AUD/USD treated the decision as a non-event, as volatility remained low and the pair kept its sideways movement.

AUD/USD continued its sideways movement yesterday, between the 0.7410  resistance level and the 0.7370 support line. As volatility seems to remain low, we maintain our sideways bias for today and the pair could be more USD led. Technically, it would be evident that the RSI indicator in the 4 hour chart remains near the reading of 50, implying a rather indecisive market. Should traders favor AUD long positions, we could see the pair breaking the 0.7410 resistance line and aim for the 0.7440 resistance level. On the flip side, should traders favor AUD short positions we could see the pair breaking the 0.7370 support line and aim for the 0.7345 support area.

RBA interest rate decision

RBA will announce its interest rate decision during tomorrow’s Asian session (04:30 GMT) and is expected to remain on hold at +1.50%. Currently, AUD OIS imply a probability for the bank to remain on hold of 99.67%. As the interest rate is expected to remain on hold, market focus could turn to the accompanying statement. Comments could be raised about the inflation rate, as it accelerated to +2.1% yoy for Q2 of 2018, and broke the lower threshold of RBA’s inflation target range of +2.00% yoy to +3.00% yoy. With an accelerating inflation rate as well as the retail sales growth rate and at the same time a rather low unemployment, the accompanying statement could have a more hawkish tone and support AUD, while on the other hand international trade tensions could increase uncertainty somewhat.

AUD/USD continued its sideways movement on Friday, touching the 0.7410 resistance line. We could see the pair continue its sideways movement with some bullish tendencies as the market may position itself ahead of RBA’s interest rate decision. Should the pair come under buying interest we could see it breaking the 0.7410 resistance level and aim for the 0.7440 resistance area. On the other hand, should the pair come under selling interest we could see it breaking the 0.7370 support line and aim for the 0.7345 support area.

PFXS news for week ahead (July 23rd -27th)

On Monday, in the American session we get the Canadian Whole Sale Sales for May. The previous reading release in June was at 0.1%. Any reading above that figure should be taken as good news for the CAD while on the opposite any reading below could be taken as negative and could hurt the Loonie. Later in the American session we get US Existing Home Sales for June. The rate is forecasted to increase and reach 5.44 M compared to previous reading of 5.43 M while the Existing Home Sales are expected to increase to +0.5% mom from previous reading of -0.4% mom.

Should the actual rates meet the forecast we could see the USD caught in mixed financial data, as it would indicate the monthly rate increased but the overall reading has a minor decrease in home sales for June. Please be advised that Existing Home Sales are a very important indication of a healthy economic outlook.

On Tuesday, we get a number of PMI’s from Asia and Europe. Early in the Asian session, the Japanese Manufacturing PMI for July is to be released. The rate has no forecast at the moment, however, the previous reading was at 53.0. A higher figure than the one previously released could be taken as positive for the JPY.

In the European session we get Germany’s, France’s and Euro-zone’s preliminary PMI’s for July. Please note all European PMI’s are set to drop and should the actual readings meet the forecast we could see the common currency weakening as such readings could be regarded as a continuation of Euro-zone’s lukewarm to negative financial indicators. Please note, on the same day the EU Finance Ministers Meeting will take place but the start time is undisclosed.

On Wednesday, in the Asian session we get Australia’s inflation data for June. The quarterly CPI rate is forecasted to accelerate and reach +0.5% yoy compared to previous reading of +0.4% yoy as well as the yearly CPI rate which is forecasted to reach +2.2% yoy compared to previous reading of +1.9% yoy.

Should the actual rates meet the forecasts we could see the Aussie strengthening. We would also like to stress the fact that in the previous week Australian labour market report came out impressively strong for June. It was noted that with the labour supply still growing, less upward pressure was applied on wages and inflation so Reserve Bank of Australia is not expected to rate hike anytime soon.

In the European session we get German Ifo Business Climate Index for June. The rate is forecasted to drop at 101.5 from previous release 101.8. Should the actual rates meet the forecast we could see the common currency weakening somewhat, though it must be noted that due to the small decrease the market could perceive it as a muted event. However, any greater reading both negative and positive could create volatility for the EUR.

In the US session we get the US New Home Sales rate for June. The US New Home Sales rate is forecasted to drop and reach 0.670 M compared to previous reading of 0.689 M. Should the outcome be the same with the forecast, the greenback could weaken. However, the difference is not so significant, so the reaction could be rather minor.

On Thursday, in the European session, ECB will announce its interest rate decision. The bank is widely expected to remain on hold at 0.00%, as EUR OIS imply a probability for the bank to remain on hold at 97.61%. If the interest rate decision comes out as expected, we could see the market’s attention shifting to the accompanying statement and the following press conference. Should there be any signs of the bank starting to unwind its QE program as suggested by ECB officials previously, we could see the common currency gaining ground. Please be advised that the interest rate decision and the following press conference may leverage volatility on EUR crosses. It is expected that the asset purchases could end this year, as announced, and the market doesn’t expect an update on the policy path until March.

In the US session, we get the US New Home Sales for June. The forecast implies in increase to +2.5% from a previous count of -0.4%. Please be advised the USD could strengthen on the release of the news, should the forecast be realized.

On Friday, early in the European session we get UK’s Nationwide HPI readings for July. The UK’s yearly Nationwide HPI rate previous reading of +2.0 % yoy while the monthly Nationwide HPI headline CPI rate’s last reading was +0.5% mom.

Should the release exceed the previous readings, we may see the GBP gaining some momentum. However, most of the attention in the UK is placed on the Brexit as it is turning out to be a very difficult topic to deal with. The UK remains divided on how the matter should be dealt with and so Cable has been kept down lately.

In the American session we get the US GDP rate for July. This is the most significant event for the day and the US GDP rate is forecasted to accelerate to +4.1% qoq compared to previous reading of +2.0% qoq. Should the headline rate’s actual reading meet the forecast and the US GDP rate accelerate as well, we could see the greenback getting some support. In addition and regarding the US, during the past week Powell said the Fed will continue to slowly raise interest rates for now’ in order to keep inflation near target amid a robust conditions in the U.S. labour market.