RBA Preview - #AUDUSD Expectation

Attention now turns to the upcoming RBA decision, with markets widely anticipating the Australian central bank to keep the policy steady.

RBA on a wait-and-see mode until early 2016

The Reserve Bank of Australia (RBA) is expected to keep the cash rate unadjusted at a record-low 1.75% at its policy decision due later today. The renewed declines in commodity prices and the recent sell-off in the Chinese equities may remain a topic in the statement and could lead to the change in the language surrounding the AUD level. Iron-ore prices, one of Australia's biggest export commodities, plunged nearly 11% in November, hitting almost 10-year low of $43.40 per tonne on November 2.

Moreover, with the solid labour market recovery and improving growth expectations, markets now argue that more easing by the RBA can be easily deferred to early 2016, after RBA Governor Glenn Stevens told a cut to "chill out" last week. In fact, economists are predicting a double rate-cut next year.

Analysts at ANZ noted, Statements since August have characterised the AUD with
"The Australian dollar is adjusting to the significant declines in key commodity prices.” 
This statement shifted in August, where previously the bank had said
“The Australian dollar has declined noticeably against a rising US dollar over the past year, though less so against a basket of currencies. Further depreciation seems both likely and necessary, particularly given the significant declines in key commodity prices. “

AUDUSD : Key levels to watch

The pair tested Nov 25 High at 0.7286 and now hovers near 0.7275 region, with the immediate resistance at 0.7299 (Oct 23 High), above which gains could be extended to strong hurdle located at 0.7365/66 (Oct 13 & 15 High) levels.

On the flip side, should the RBA statement sound dovish or talk down on the AUD level, the price would drop to the immediate support is seen at 0.7220. Selling pressure is likely to intensify below the last, dragging the Aussie to 0.7169.
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