RBA Catches Traders Offside With Rate Pause
AUD Under Pressure
The Aussie Dollar has been under heavy selling pressure across the European morning on Tuesday, following the August RBA meeting overnight. The bank caught markets a little offside by keeping rates steady at 4.10%. While expectations were split, consensus favoured a further .25% hike yesterday, as reflected in the Bloomberg economists survey where 15 out of 25 respondents forecast a further hike. This was similar to the Reuters survey which showed 20 out of 36 in favour of a hike.
Tightening Might be Finished
Explaining the decision to hold rates steady, the RBA noted that past tightening was helping cool demand, evidenced by falling inflation. However, the bank did reaffirm its prior message that it stands willing to tighten further if necessary. Lowe noted that recent data was consistent with inflation returning to the bank’s 2% - 3% target band over the measured horizon, allowing for a pause here. In light of these comments, the market view has now shifted with traders sensing that the bank will be done with tightening unless we see any upside inflationary surprise in coming months. As such, AUD looks likely to remain pressured near-term.
Technical Views
AUDUSD
The sell off in the Aussie has seen the pair testing back below the .6681 level today. While below here, and with momentum studies falling, the pair is vulnerable to a drop down to deeper support at the .6520 level. To the topside, .6857 and the bearish trend line remain the key resistance areas to watch.
Disclaimer: The material provided is for information purposes only and should not be considered as investment advice. The views, information, or opinions expressed in the text belong solely to the author, and not to the author’s employer, organization, committee or other group or individual or company.
Past performance is not indicative of future results.
High Risk Warning: CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. 71% and 70% of retail investor accounts lose money when trading CFDs with Tickmill UK Ltd and Tickmill Europe Ltd respectively. You should consider whether you understand how CFDs work and whether you can afford to take the high risk of losing your money.
With 10 years of experience as a private trader and professional market analyst under his belt, James has carved out an impressive industry reputation. Able to both dissect and explain the key fundamental developments in the market, he communicates their importance and relevance in a succinct and straight forward manner.