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AUD/USD: RBA Sounds Neutral, As Expected

AUD/USD: RBA Sounds Neutral, As Expected

AUD/USD: RBA sounds neutral, as expected Macroeconomic overview

The Reserve Bank of Australia held rates steady, widely expected decision given policymakers recently signalled a steady outlook for much of the year ahead.

Governor Philip Lowe has repeatedly emphasised limits to monetary policy and last month said further cuts in interest rates would not be in the national interest as the danger of a debt-fuelled boom and bust was just too severe. With the governor signalling a high bar for a move lower, interbank futures imply a mere 6% chance of another cut by August. Today Lowe maintained his upbeat tone:

Exports have risen strongly and non-mining business investment has risen over the past year … Most measures of business and consumer confidence are at, or above, average.

He also reiterated the central bank’s forecasts for a gradual pick-up in underlying inflation, which is pinned at a record low of 1.5%.

A survey of business expectations by Dun & Bradstreet on Tuesday found business confidence was at an 18-month high while plans for capital investments for the second quarter of 2017 were at a two-year peak.

The Australian dollar inched higher after the rate decision, supported by the outlook for steady policy. But the reaction was short-lived.

Technical analysis The rejection of upward move today is an important bearish signal. What is more, the AUD/USD is below the negatively aligned 7-day exponential moving average, which highlights the bearish near-term outlook. But the scope for downward move is limited. The 0.7544 low on March 3 is still an important support level. Another solid support is situated at 0.7514 (38.2% fibo of December-February rise).

AUD/USD Daily Forex Signals Chart

Trading strategy We think that further fall in the AUD/USD is likely in the near term, but we stay sideways, as the scope of this move may be relatively small. We will be looking to use lower levels to open another long position.

Source: – Daily Forex Trading Strategies

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