AUD/USD Could Target 0.7000 if the RBA Strikes an Optimistic Tone
Matt Weller, CFA, CMT November 4, 2019 1:23 PM
After two of the biggest weeks for macroeconomic releases (not to mention most of the top-tier earnings reports), this week’s calendar is comparatively subdued. That said, there are still some key events to keep an eye on, including tonight’s confab at the Reserve Bank of Australia (RBA).
According to the ASX’s RBA Rate Indicator tool, the odds of the central bank remaining on hold tonight are 93% with the remaining 7% of the market betting on an interest rate cut. Since the RBA’s last meeting, Australia’s unemployment rate has dropped 0.1% to 5.2% and inflation has ticked up 0.1% to 1.7% (though this is still below the central bank’s 2-3% target range). As of writing, traders are pricing in about a 1-in-4 chance of an interest rate cut by the central bank’s December meeting, so the release could still move markets if the tone of the monetary policy statement and the RBA’s outlook for the economy shift those odds meaningfully.
Of course, the progress of US-China trade talks is a big question market for both the RBA and Australian dollar traders. With the recent positive comments and likelihood of a “Phase One” trade deal this month, the Aussie has rallied out of a two-year bearish channel to hit its highest level in more than three months.
Source: TradingView, FOREX.com
With the MACD indicator trending higher above both its signal line and the “0” level and the RSI recently showing a bullish divergence, the stage is set for a continued rally in AUD/USD. More optimistic comments from the RBA could take the pair toward key psychological resistance at 0.7000. On the other hand, a break back below previous resistance in the 0.6880 area (perhaps on the back of a more cautious RBA statement) would erase the pair’s near-term bullish bias.
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.