The AUD/USD RBA Preview

July 5, 2016

Image: mikemcd Flikr (cc)

I want to run this as a follow-up post to yesterday’s hung parliament blog and again focus on AUD/USD.

The weekend gap that we spoke about yesterday was duly filled, and the doom and gloom that the hung parliament was supposed to cast over local markets didn’t eventuate.

AUD/USD 15 Minute:
Click on chart to see a larger view.

With vote counting (yes it’s 2016, we don’t work Sundays and we’re doing it manually) still going, and the country no closer to forming even a close to functioning minority government, attention turns to today’s Reserve Bank of Australia rate decision.

We see that all but the one… and there’s always one for reasons you can make your own mind up on… surveyed economists expecting no change when the clock strikes 2.30 pm on the east coast of Australia. Of course the odd man out is looking for a cut and nobody expects a hike.

The RBA most recently cut rates from 2.00% to the 1.75% level we sit at now back in May. This was on the back of the most recent domestic CPI release showing that inflation massively missed expectations and the RBA was forced to move then and there in a shock decision which you can see on the table below:


Vantage FX clients can access the News Terminal FREE

Since that cut, the RBA has however dropped the ‘easing bias’ from official statements, including in the minutes of the June meeting which we got to read last Tuesday.

The Australian hung parliament has drawn things out, not to mention the big one being how long it will take for the UK to actually leave the European Union. All this points to the RBA most likely taking a “wait and see” approach today, and communicating a cut in August by returning the easing bias in the accompanying statement.

Early signs have been that financial markets haven’t really missed a beat despite domestic and international issues and I just can’t see a conservative Stevens taking the early jump. Remember, the next CPI data release comes on July 27, a release that the RBA will most likely want to see before pressing the red button.

Turning to the charts, and one possible scenario I’d like to highlight is a continuation of the AUD/USD contrarian play that we spoke about back in May. At the time, this was about getting long at weekly support and playing for some key US data misses which would delay any 2016 interest rate hikes from the Fed.

AUD/USD Weekly:
Click on chart to see a larger view.

We got the US data misses, as well as some better than expected local data which gave the Aussie a kick out of the highlighted support level, and price hasn’t looked back since.

But what about the here and now? Coming back to the present and we have Brexit uncertainty all but quashing any 2016 hikes from the Fed and there is even talk that the next move could be a cut! All this does is point to further USD weakness that AUD/USD longs can continue to peg their hats on.

Add this to the RBA reasoning above and we have a case to still be bullish AUD.

AUD/USD Hourly:
Click on chart to see a larger view.

Looking for some short term levels to manage our risk around, we have yesterday’s gap and some obvious swing high/lows that stand out. But this is more than likely to be chopped as the reality is that price is sitting in the dead middle of a higher time frame triangle. Higher time frame is king and that weekly chart further up is the one you want to be paying attention to.

All you can do here is plan your trade and trade your plan. Nothing else matters.


On the Calendar Tuesday:
AUD Retail Sales m/m
AUD Trade Balance
AUD Cash Rate
AUD RBA Rate Statement

GBP Services PMI
GBP BOE Gov Carney Speaks

NZD GDT Price Index

Make the switch to Australian Forex Broker Vantage FX today!

Dane Williams – @VantageFX

Risk Disclosure: In addition to the website disclaimer below, the material on this page prepared by Forex broker Vantage FX Pty Ltd does not contain a record of our prices or solicitation to trade. All opinions, news, research, tools, prices or other information is provided as general market commentary and marketing communication – not as investment advice. Consequently any person acting on it does so entirely at their own risk. The experts writers express their personal opinions and will not assume any responsibility whatsoever for the Forex account of the reader. We always aim for maximum accuracy and timeliness, and FX broker Vantage FX shall not be liable for any loss or damage, consequential or otherwise, which may arise from the use or reliance on this service and its content, inaccurate information or typos. No representation is being made that any results discussed within the report will be achieved, and past performance is not indicative of future performance.


Free Daily Market Update

Live Spreads



Sign up to the latest forex news and daily FX trading setups

Get started with a FREE $50,000 demo account