RBA Preview AUDUSD Holds Above 70c Ahead Of Expected Rate Cut

RBA Preview: AUD/USD Holds Above 70c Ahead Of Expected Rate Cut

The consensus expects RBA to cut their overnight cash rate (OCR) to a new record low of 1% tomorrow. Yet it could be down to how dovish Lowe is in his subsequent speech as to whether 70c can crash though 70c.

On the 16^th June Philip Lowe said it was ‘likely’ RBA would have to cut rates again. According to a Reuters poll, 29 of the 40 economists (72.5%) questioned expect a rate cut tomorrow to 1%. This is slightly above the 66% probability the ASX interbank futures suggest. Either way, the clear majority expect a rate cut tomorrow, but it could be down to how dovish the statement or comments are as to whether it will knock AUD over.

That said, June’s statement lacked a clear dovish bias, and it was comments made later in the day from RBA’s governor Philip Lowe which hammered home the likelihood that further cuts were coming. As it stands, 52.6% of economists poled by Reuters expect RBA’s cash rate to sit at 0.75% by year end. Tomorrow could provide opportunity for RBA to bring some clarity over this likelihood.

In contrast to last month’s meeting, AUD/USD has been mostly rising into the expected rate cut. A dovish Fed has provided the tailwind, although since Powell walked back some of his dovish comments, it’s plausible that the upside potential for AUD/USD could be limited unless RBA surprise markets with a hold or remove their dovish bias (which is unlikely).

AUD/USD has broken back above 70c, although weak PMI data from Asia has seen it wobble at the highs and test this key level. At the time of writing, AUD/USD is on track for a dark cloud cover pattern (with a bearish engulfing candle) at the highs ahead of tomorrow’s meeting. If we’re to see a dovish cut, we’d expect AUD to trade comfortably below 70c by the end of the session.

Given the 100-day moving average is capping as resistance, and structural highs are nearby at 0.7048 and 0.7069, the reward to risk potential appears more favourable to the bear camp. Just as long as the RBA deliver a dovish cut. And, once again 70c appears pivotal around RBA’s highly anticipated meeting.

From time to time, StoneX Financial Pty Ltd (“we”, “our”) website may contain links to other sites and/or resources provided by third parties. These links and/or resources are provided for your information only and we have no control over the contents of those materials, and in no way endorse their content. Any analysis, opinion, commentary or research-based material on our website is for information and educational purposes only and is not, in any circumstances, intended to be an offer, recommendation or solicitation to buy or sell. You should always seek independent advice as to your suitability to speculate in any related markets and your ability to assume the associated risks, if you are at all unsure. No representation or warranty is made, express or implied, that the materials on our website are complete or accurate. We are not under any obligation to update any such material.

As such, we (and/or our associated companies) will not be responsible or liable for any loss or damage incurred by you or any third party arising out of, or in connection with, any use of the information on our website (other than with regards to any duty or liability that we are unable to limit or exclude by law or under the applicable regulatory system) and any such liability is hereby expressly disclaimed.

City Index is a trading name of StoneX Financial Pty Ltd.

The material provided herein is general in nature and does not take into account your objectives, financial situation or needs.

While every care has been taken in preparing this material, we do not provide any representation or warranty (express or implied) with respect to its completeness or accuracy. This is not an invitation or an offer to invest nor is it a recommendation to buy or sell investments.

StoneX recommends you to seek independent financial and legal advice before making any financial investment decision. Trading CFDs and FX on margin carries a higher level of risk, and may not be suitable for all investors. The possibility exists that you could lose more than your initial investment further CFD investors do not own or have any rights to the underlying assets.

It is important you consider our Financial Services Guide and Product Disclosure Statement (PDS) available at www.cityindex.com/en-au/terms-and-policies/, before deciding to acquire or hold our products. As a part of our market risk management, we may take the opposite side of your trade. Our Target Market Determination (TMD) is also available at www.cityindex.com/en-au/terms-and-policies/.

StoneX Financial Pty Ltd, Suite 28.01, 264 George Street, Sydney, NSW 2000 (ACN 141 774 727, AFSL 345646) is the CFD issuer and our products are traded off exchange.