The Reserve Bank of Australia (RBA) will announce its latest monetary policy decision in about 30 minutes later and today’s decision will be critical as […]
The Reserve Bank of Australia (RBA) will announce its latest monetary policy decision in about 30 minutes later and today’s decision will be critical as we have some lacklustre economic data (inflation rate) that may trigger RBA to adopt a dovish stance on its monetary policy as it keep its benchmark cash rate unchanged at 2% (current record low) since 06 May 2015.
In the last monetary policy statement release on 05 April 2016, RBA Governor did highlight that “continued low inflation would provide scope for easier policy, should that be appropriate to lend support to demand”. The latest inflate rate for Q1 2016 has eased to 1.3% y/y from 1.7% in Q4 2015 which is below market expectation. In addition, it is the first quarterly (q/q) decline since Q4 2008.
The cash rate futures have priced in a probability of 47% for a 25bps interest rate cut today after the latest weaker than expected CPI reading and market consensus are also divided as media has reported that Bloomberg’s latest survey indicated that 10 of 24 economists polled do expect a rate cut. Let us take a look at the potential short-term movement on the AUD/USD from a technical analysis perspective.
(Click to enlarge charts)
Pivot (key resistance): 0.7700/7710
Supports: 0.76150 & 0.75300
Next resistance: 0.7825 (lower limit of long-term key resistance zone)
The AUD/USD is at a tipping level of 0.7700/7710 where technical elements are suggesting a potential downside reversal to test the intermediate support at 0.76150 (lower boundary of the short-term ascending range from 28 April 2016 low). A break below 0.76150 is likely to add impetus for a further decline to target the next support at 0.7530 (0.618 Fibonacci projection + ascending trendline from 24 March 2016 low).
However, a clearance above the 0.7700/7710 pivotal resistance is likely to invalidate the preferred bearish scenario to see a squeeze up towards the next resistance at 0.7825 (lower limit of long-term key resistance zone).
Charts are from eSignal
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