AUD/USD: We expect neutral RBA statement
Macroeconomic overview
Data from the Australian Bureau of Statistics out on Monday showed retail sales rose 0.4% in January, in line with market forecasts and up from a 0.1% fall in December.
The Reserve Bank of Australia will hold a scheduled meeting on Tuesday against a favorable backdrop: global growth is ticking along nicely (certainly better than most expected a couple of quarters ago), economic dynamics at home are improving and Australia's terms of trade have seen substantial gains.
In particular, in its February statement, the bank said that “GDP was weaker than expected in the September quarter… (but) a return to reasonable growth is expected in the December quarter”. If "reasonable” is interpreted to mean “about average”, the fourth-quarter GDP numbers must surely have taken board members by surprise: quarterly growth registered an expansion of 1.1%, far above the historical mean.
Although we think it might be too early for the RBA to consider turning slightly hawkish (since inflation is still below the target range), the risk of this has certainly increased compared to a few weeks ago.
A roughly unchanged central bank statement will be neutral for the AUD/USD and the rate is likely to take its cues from the dollar in the near term. Friday’s USD sell-off after hawkish Yellen’s comments suggest that the USD rally may be over. We think that the uptrend in US breakeven rates should keep US real rates pressured, eventually leading investors to buy currencies in countries where inflation has just started rising, while monetary policy is still priced in to remain accommodative for too long. In our opinion long-term AUD/USD outlook is bullish.
Technical analysis
Technical analysis does not point to a clear buy or sell signal. 7-day broke below 14-day exponential moving average and both averages are negatively aligned. However, a recovery candlestick on Friday suggests that the downward move may not be continued. The support level is 38.2% fibo of December-February rise at 0.7514. This could be a good level to consider another long position on this pair.
Trading strategy
We have closed our short-term position with a small loss, as we think there is an increasing risk of AUD/USD rise in the coming days. We stay sideways now, as in our opinion no position is justified from risk/reward perspective.
GrowthAces.com - Daily Forex Trading Strategies
Macroeconomic overview
Data from the Australian Bureau of Statistics out on Monday showed retail sales rose 0.4% in January, in line with market forecasts and up from a 0.1% fall in December.
The Reserve Bank of Australia will hold a scheduled meeting on Tuesday against a favorable backdrop: global growth is ticking along nicely (certainly better than most expected a couple of quarters ago), economic dynamics at home are improving and Australia's terms of trade have seen substantial gains.
In particular, in its February statement, the bank said that “GDP was weaker than expected in the September quarter… (but) a return to reasonable growth is expected in the December quarter”. If "reasonable” is interpreted to mean “about average”, the fourth-quarter GDP numbers must surely have taken board members by surprise: quarterly growth registered an expansion of 1.1%, far above the historical mean.
Although we think it might be too early for the RBA to consider turning slightly hawkish (since inflation is still below the target range), the risk of this has certainly increased compared to a few weeks ago.
A roughly unchanged central bank statement will be neutral for the AUD/USD and the rate is likely to take its cues from the dollar in the near term. Friday’s USD sell-off after hawkish Yellen’s comments suggest that the USD rally may be over. We think that the uptrend in US breakeven rates should keep US real rates pressured, eventually leading investors to buy currencies in countries where inflation has just started rising, while monetary policy is still priced in to remain accommodative for too long. In our opinion long-term AUD/USD outlook is bullish.
Technical analysis
Technical analysis does not point to a clear buy or sell signal. 7-day broke below 14-day exponential moving average and both averages are negatively aligned. However, a recovery candlestick on Friday suggests that the downward move may not be continued. The support level is 38.2% fibo of December-February rise at 0.7514. This could be a good level to consider another long position on this pair.
Trading strategy
We have closed our short-term position with a small loss, as we think there is an increasing risk of AUD/USD rise in the coming days. We stay sideways now, as in our opinion no position is justified from risk/reward perspective.
GrowthAces.com - Daily Forex Trading Strategies
