All trading involves risk. Ensure you understand those risks before trading.
All trading involves risk. Ensure you understand those risks before trading.

The flare up the RBA and the AUDUSD

In recent years, I have been a regular traveller to the twin towns of Albury and Wodonga which straddle the mighty Murray River on the NSW-Victorian border. Wonderful towns, renown for country hospitality, and for those townsfolk who are used to moving freely between the two towns for work reasons, it’s going to be a challenging period.

The situation here in Australia sums up succinctly the current predicament for global markets. The positive rebound following the re-opening is being threatened by regional Covid-19 flare-ups that raise questions about the economic outlook and how it might alter consumer behaviour. Who would want to be a central banker right now?

This brings me to tomorrow's RBA meeting and what all of this means for the AUDUSD.

The RBA is widely expected to keep interest rates on hold at 0.25% and the 3-year yield target will remain at 0.25%. The RBA will reiterate its dovish forward guidance and that its “accommodative approach will be maintained as long as it is required.” Of particular interest, if the virus flare-up in Melbourne is mentioned in the statement and how it might impact the recovery.

Turning to the AUDUSD, the market rewarded the AUDUSD during April and May for the apparent successful suppression of the virus here in Australia. Thus the situation in Victoria in theory represents a headwind to the currency.

Technically, the price action for the past month following the .7064 high is viewed as corrective. Ideally, I would like to see another leg lower towards the .6680 support area to complete the correction and where I would look to be a buyer. However, should the final pullback fail to materialize, confirmation the correction is complete would be a break/close above the .7064 high which warns that a move towards .73/.75c is underway.

Source Tradingview. The figures stated areas of the 6th of July 2020. Past performance is not a reliable indicator of future performance.  This report does not contain and is not to be taken as containing any financial product advice or financial product recommendation

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.

© City Index 2024