RBA Holds Rates Steady
The Aussie Dollar is rising today on the back of a hawkish hold from the RBA overnight. Following the recent jump in inflation, the RBA held rates on hold while citing increased concern over inflationary pressures. Additionally, resilience in the jobs market is adding to the bullish sentiment we’re seeing in AUD today. Traders had built up RBA easing expectations over the summer, projecting at least one further cut this year following the August cut. However, these expectations have been unwound in recent weeks, and AUD looks likely to advance further near term as a result.
Q3 Inflation On Watch
Looking ahead, the big focus now will be the upcoming Q3 inflation report due at the end of October. This data will be pivotal in determining how the RBA moves on rates through the end of the year. The latest monthly data showed inflation moving back up to a 12-month high of 3% in August. While the RBA has acknowledged volatility in these monthly readings the uptick has clearly warranted concern and should the Q3 report reflect a quarterly increase in inflation the bank is expected to keep rate son hold through the end of the year.
RBA/Fed Divergence
Given traders’ dovish Fed outlook (seen cutting rates twice more this year), there is plenty of room for the divergence between the two central banks to drive AUDUSD higher near-term.
Technical Views
AUDUSD
The correction lower has found strong support into the latest test of the rising wedge lows and the .6547 level. While that area holds, focus is on a fresh test of the .6677 level and a breakout higher towards .6802 next. Should the current support break, focus will turn to .6395 as the deeper level to watch next.
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With 10 years of experience as a private trader and professional market analyst under his belt, James has carved out an impressive industry reputation. Able to both dissect and explain the key fundamental developments in the market, he communicates their importance and relevance in a succinct and straight forward manner.