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2 Jun 2015
RBA interest rates preview: What to expect in AUD/USD?
FXStreet (Bali) - AUD/USD has found a temporary technical cushion along the 0.76 handle, last at 0.7615, as liquidity dries up ahead of the RBA interest rates decision, due at 4.30 GMT.
Will the RBA intensify its dovish rhetoric?
During the month of May, we saw a wild inverted V-shape ride in the AUD/USD market, with the 2-week bull tendencies - May 5th to 14th - being driven by what was perceived as an unexpected removal of the RBA's explicit easing bias, despite cutting rates to a fresh record low of 2%. However, dovish comments from RBA Deputy Governor Lowe mid May reiterating that the RBA has further room to lower rates, coupled with the re-introduction on a more vocal dovish rhetoric in the last RBA minutes, has resulted in a record bearish run of 11 losing days out of the last 13. Adding fuel to the AUD/USD bearish momentum, a very poor Australian capital expenditure report last week, led to the anticipation of below average growth for longer in Australia, implying a more prolonged easier policy stance by the RBA.
AUD/USD technicals
The startling bearish recovery off 0.81+ highs since mid last month has seen consistent supply entering the market, with sellers well in control heading into the RBA interest rates decision, with a key macro level of support at 0.76 recently tested. Readers should be reminded that in Central Bank days, technicals don't hold as much relevance, therefore one should be paying special attention to the outcome of the RBA monetary policy meeting. All signs point for the RBA to strengthens a more explicit dovish bias on its statement, as seen in the last minutes, yet maintain rates steady for now - all 28 economists surveyed by Bloomberg expect rates to stay on hold -. If that's the scenario that ends up materializing, sellers will likely remain committed, with a critical technical event being a decisive break and daily hold below the tough 0.76 handle.
Will the RBA intensify its dovish rhetoric?
During the month of May, we saw a wild inverted V-shape ride in the AUD/USD market, with the 2-week bull tendencies - May 5th to 14th - being driven by what was perceived as an unexpected removal of the RBA's explicit easing bias, despite cutting rates to a fresh record low of 2%. However, dovish comments from RBA Deputy Governor Lowe mid May reiterating that the RBA has further room to lower rates, coupled with the re-introduction on a more vocal dovish rhetoric in the last RBA minutes, has resulted in a record bearish run of 11 losing days out of the last 13. Adding fuel to the AUD/USD bearish momentum, a very poor Australian capital expenditure report last week, led to the anticipation of below average growth for longer in Australia, implying a more prolonged easier policy stance by the RBA.
AUD/USD technicals
The startling bearish recovery off 0.81+ highs since mid last month has seen consistent supply entering the market, with sellers well in control heading into the RBA interest rates decision, with a key macro level of support at 0.76 recently tested. Readers should be reminded that in Central Bank days, technicals don't hold as much relevance, therefore one should be paying special attention to the outcome of the RBA monetary policy meeting. All signs point for the RBA to strengthens a more explicit dovish bias on its statement, as seen in the last minutes, yet maintain rates steady for now - all 28 economists surveyed by Bloomberg expect rates to stay on hold -. If that's the scenario that ends up materializing, sellers will likely remain committed, with a critical technical event being a decisive break and daily hold below the tough 0.76 handle.