Tomorrow presents Trade Balance, Retails Sales, Cash Rate and RBA statement. On paper this should be a corker… Unfortunately the reality may be a little different.
RBA are very unlikely to change the Cash rate tomorrow from 2.5%, with the RBA shadow board almost unanimously agreeing to a ‘no excitement’ vote for the markets. So it will be down to the accompanying rate statement for chances of any excitement, but sadly this is also likely to be a non-event.
That said, any rewording of the statement tomorrow is likely to be closely scrutinised by economists, but in order to see a tradable opportunity we would really need to see some stern language from the RBA regarding the ‘historically high’ exchange rate. Unfortunately if history is anything to go by then RBA are not likely to ‘do an RBNZ’ and get aggresive with their exchange rate talk and RBA are to remain in a watch and wait mode.
The RBA are facing a double edged sword regarding interest rates and the housing sector, which is fuelled by historically low inflation rates. Cutting them further will surely add to the property investment interest, whilst raising them may slow down other parts of the economy which are still struggling. Therefor we are more likely to see the introduction of macro-prudential tools before any decision is made for the cash rate (in either directin) and then be treated to yet another round of ‘wait and see’ from RBA, putting rates on hold at 2.5% well into next year.
So we may stand a better chance of a tradable opportunity coming from Retail sales and Trade Balance at 11:30 AEDT tomorrow before the Cash Rate decision. Of course the risk here is that despite the markets agreeing to expect little from the rate decision, they’ll hold off from any extended position taking prior to the rate decision anyway just in case.
The Trade defecit is expected to widen to a 4-month low which leaves A$ vulnerable to an upside surprise if it doesn’t come in as bad as expected.
The fact remains that the AUDUSD is within range and continues to trade within a complex correction between 0.864 and 0.90. We could be witnessing a sideways correction to be followed by a move below 0.864, or this could just be the beginning of a basing pattern. All we know for now is that traders would be best to trade on lower time horizons, sell into resistance or buy at support – but certainly not outstay their welcome.
– 0.837 is the mid-way point (and a pivotal S/R level) within the 0.864-0.890 range)
– Bearish setups favoured below 0.837 and bullish setups favoured above 0.837
– A wider Trade Deficit and soft retail sales should see AUDUSD comfortably below this level