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When is the RBA and how could it affect AUD/USD?

RBA interest rate decision review

While all expect the RBA to stay on hold at 1.5% for a 15th consecutive meeting, due at 03:30GMT, the wording in the statement will be analysed for any shifts in the outlook for policy and the domestic/global economy.  The market is looking for the RBA's take on the recent retail sales and inflation data in particular that has disappointed, while some observers are even calling for rate cuts in the not too distant future. So we are the lookout to see if the RBA's rhetoric might start to lean towards the dovish side.

Analysts at Westpac highlight the key topics under review:

"Key aspects of the statement will be on the subdued retail spending partial despite ongoing job gains, a cooling housing market and the inflation outlook. Clear guidance will be provided in the SoMP and associated forecasts on Friday.

  • The Reserve Bank has indicated that interest rates will be targeted at inflation and growth while macroprudential policy will address financial stability.
  • Current trends indicate that financial stability concerns will be easing for the Bank. That suggests that a further “round” of macroprudential policies will not be necessary.
  • Interest rate increases that might accelerate weakness in real estate markets which might have a spillover impact on confidence and spending will also be unattractive.
  • However, interest rate cuts to head off a more severe adjustment in housing markets still seem quite remote."

How could the RBA decision/statement affect AUD/USD?

AUD/USD’s corrective rebound is not convincing and seems to be running out of ground. With a lack of traction on the 0.77 handle, the bias leans bearish and leaves 0.7625 exposed, otherwise guarding the 2016-2017 uptrend line at 0.7472. On the upside, if 0.7730 gives way, being the 5th Oct low and recent highs, the 21-D SMA located at 0.7762 comes into focus. However, it will take a strong close on the 0.78 handle to bring back the mid-October highs at 0.7896 as a feasible target, and until that level is achieved, the market remains in the hands of the bears.  While this meeting is of interest, it is doubtful to offer any major surprises for price action to break out of the more narrow and familiar range of between (PP 1w S1) 0.7620/7730, (monthly fibo 38.2%), as key levels according to The FXStreet Technical Confluences Indicator.

Key notes

About the RBA interest rate decision 

The RBA Interest Rate Decision is announced by the Reserve Bank of Australia. If the RBA is hawkish about the inflationary outlook of the economy and raises the interest rates it is positive, or bullish, for the AUD. Likewise, if the RBA has a dovish view on the Australian economy and keeps the ongoing interest rate, or cuts the interest rate it is seen as negative, or bearish.

Author

Ross J Burland

Ross J Burland, born in England, UK, is a sportsman at heart. He played Rugby and Judo for his county, Kent and the South East of England Rugby team.

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When is the RBA and how could it affect AUD/USD?