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6 Aug 2013
RBA next: Impact on the AUD/USD
FXstreet.com (Barcelona) - The Reserve Bank of Australia will publish its monetary policy decision at 4.30 GMT, with calls for a rate cut universal among market commentators and economists.
What might be the AUD/USD reaction?
As Bradley Gilbert, CTA, from Traders4Traders, notes, "the statement is the key", asking "will the RBA signal further rate cuts or hold off for now? That’s the question and the answer to the next major move in the AUD."
Gilbert adds: "If the RBA cut rates…the AUD will hardly move. If they don’t, it will be 100 points higher in 5 seconds.It all comes down to the statement." The market, as Gilbert's comments reflect, "want to know if they are still considering cutting rates further. If this line is still in, then consider it as another cut coming next month. If it’s out, then the currency may in fact rally."
The market is pricing north of 100% for a rate cut by the RBA today, which implies some marginal speculation of a 50bp cut. Accordng to Valeria Bednarik, Chief Analyst at FXstreet.com, "With the rate at 2.75% there is plenty of room to continue cutting: a minus 0.25% may not do much to a market that has already priced it in, but a 0.50% cut will be indeed shocking and se AUD selling off even further." Valeria thinks a 50bp is hard to believe.
Bednarik adds that "a hawkish stance on the statement, on other hand, may favor some temporal recoveries in the Australian currency, yet selling interest is expected to surge on moves higher."
As Sean Lee from FXWW notes: "A 25bps rate cut is already 100% priced in so unless the statement is very dovish, I cannot envisage any major sell-off in the AUD."
Technically, Lee sees the daily chart heavily oversold and" only a break back above .9050 will endanger the bear trend", adding that "the short-term charts are showing support/resistance at .8850/80 and .8990/00, and these levels will more than likely hold firm pre-RBA."
Earlier on the session, Sean Callow from Westpac, said: ""With the RBA likely to lower its 2014 growth forecast in Friday's quarterly statement, a dovish tone seems assured, probably including retention of the familiar “scope” to ease line."
Callow adds: "We don’t expect language to hint that they are inclined to move again in Sep though (22% priced in) as the RBA usually prefers not to act at consecutive meetings so Nov seems a more likely window." Callow suspects the AUD would suffer limited damage in the worst case "and may even squeeze a little higher" the Strategist said.
Traders should have present the article published earlier on the possible dangers of getting too bearish on the Australian Dollar given recent bullish signals. However, the AUD/USD is indeed a very strong bear trend, so anything can happen.
What might be the AUD/USD reaction?
As Bradley Gilbert, CTA, from Traders4Traders, notes, "the statement is the key", asking "will the RBA signal further rate cuts or hold off for now? That’s the question and the answer to the next major move in the AUD."
Gilbert adds: "If the RBA cut rates…the AUD will hardly move. If they don’t, it will be 100 points higher in 5 seconds.It all comes down to the statement." The market, as Gilbert's comments reflect, "want to know if they are still considering cutting rates further. If this line is still in, then consider it as another cut coming next month. If it’s out, then the currency may in fact rally."
The market is pricing north of 100% for a rate cut by the RBA today, which implies some marginal speculation of a 50bp cut. Accordng to Valeria Bednarik, Chief Analyst at FXstreet.com, "With the rate at 2.75% there is plenty of room to continue cutting: a minus 0.25% may not do much to a market that has already priced it in, but a 0.50% cut will be indeed shocking and se AUD selling off even further." Valeria thinks a 50bp is hard to believe.
Bednarik adds that "a hawkish stance on the statement, on other hand, may favor some temporal recoveries in the Australian currency, yet selling interest is expected to surge on moves higher."
As Sean Lee from FXWW notes: "A 25bps rate cut is already 100% priced in so unless the statement is very dovish, I cannot envisage any major sell-off in the AUD."
Technically, Lee sees the daily chart heavily oversold and" only a break back above .9050 will endanger the bear trend", adding that "the short-term charts are showing support/resistance at .8850/80 and .8990/00, and these levels will more than likely hold firm pre-RBA."
Earlier on the session, Sean Callow from Westpac, said: ""With the RBA likely to lower its 2014 growth forecast in Friday's quarterly statement, a dovish tone seems assured, probably including retention of the familiar “scope” to ease line."
Callow adds: "We don’t expect language to hint that they are inclined to move again in Sep though (22% priced in) as the RBA usually prefers not to act at consecutive meetings so Nov seems a more likely window." Callow suspects the AUD would suffer limited damage in the worst case "and may even squeeze a little higher" the Strategist said.
Traders should have present the article published earlier on the possible dangers of getting too bearish on the Australian Dollar given recent bullish signals. However, the AUD/USD is indeed a very strong bear trend, so anything can happen.