Top Story

AUD/USD surges ahead of RBA decision

Amid this week’s busy and potentially market-moving schedule dominated by Thursday’s UK general election and European Central Bank policy decision, a key event likely to affect the Australian dollar may well have been overlooked. The Reserve Bank of Australia (RBA) will release its own rate decision and statement on Tuesday, and the Australian dollar has been rising sharply against the US dollar (on the back of a weaker than expected US jobs report on Friday) in the few days running up to this RBA release.

In the days ahead of last month’s RBA meeting, AUD/USD had also been rising prior to the announcement of rates being kept steady in conjunction with a mixed-to-optimistic statement by the central bank. Shortly after that May decision announcement, however, AUD/USD proceeded to drop sharply within its then-prevailing downtrend channel. The RBA had hinted in that May statement that it much preferred a weaker Australian dollar.

For Tuesday’s release, the RBA is again expected to keep rates steady at 1.50%, where it has remained since it was lowered by 25 basis points in August of last year. As always, however, the central bank’s depiction of the Australian economy and inflation, along with any hints about its policy trajectory going forward, should have a significant effect on the Australian dollar.

On the US dollar side, a weaker than expected US jobs report on Friday pressured the US dollar as questions arose regarding the future path of Fed interest rate hikes after the next FOMC meeting in mid-June. Although the probability of a Fed rate hike during this mid-June meeting remains very high – above 95% according the CME’s FedWatch tool – doubts about the Fed’s intentions after June, in the face of weakening employment data, could continue to weigh on the US dollar over the longer-term.

Amid these fundamental dynamics, AUD/USD’s rise in the past few days has once again approached major resistance around the 0.7500 level. This rise comes after the currency pair bounced off the upper border of a descending trend channel late last week. If the 0.7500 resistance level holds in the aftermath of the RBA decision, AUD/USD could continue its downtrend since mid-March, with the next major downside target around the key 0.7300 support objective. Any major breakout above 0.7500 resistance, however, could prompt the currency pair to reach higher towards the 0.7600 resistance level.


Disclaimer: The information on this web site is not targeted at the general public of any particular country. It is not intended for distribution to residents in any country where such distribution or use would contravene any local law or regulatory requirement. The information and opinions in this report are for general information use only and are not intended as an offer or solicitation with respect to the purchase or sale of any currency or CFD contract. All opinions and information contained in this report are subject to change without notice. This report has been prepared without regard to the specific investment objectives, financial situation and needs of any particular recipient. Any references to historical price movements or levels is informational based on our analysis and we do not represent or warranty that any such movements or levels are likely to reoccur in the future. While the information contained herein was obtained from sources believed to be reliable, author does not guarantee its accuracy or completeness, nor does author assume any liability for any direct, indirect or consequential loss that may result from the reliance by any person upon any such information or opinions.

Futures, Options on Futures, Foreign Exchange and other leveraged products involves significant risk of loss and is not suitable for all investors. Losses can exceed your deposits. Increasing leverage increases risk. Spot Gold and Silver contracts are not subject to regulation under the U.S. Commodity Exchange Act. Contracts for Difference (CFDs) are not available for US residents. Before deciding to trade forex and commodity futures, you should carefully consider your financial objectives, level of experience and risk appetite. Any opinions, news, research, analyses, prices or other information contained herein is intended as general information about the subject matter covered and is provided with the understanding that we do not provide any investment, legal, or tax advice. You should consult with appropriate counsel or other advisors on all investment, legal, or tax matters. References to Forex.com or GAIN Capital refer to GAIN Capital Holdings Inc. and its subsidiaries. Please read Characteristics and Risks of Standardized Options.