RBA Minutes Drive Aussie Lower
City Index | Apr 16, 2019 08:44
The Australian dollar fell to the bottom of the pack following today’s RBA minutes, as traders questioned the RBA’s confidence in their labor market forecasts.
The RBA held rates at 1.5% earlier this month and provided what appeared to be a fairly-balanced and neutral statement. We’d noticed that RBA remained confident in the labor market picking up, but it was also the essential ingredient to fend off a dovish stance.
So, when the minutes discussed cutting if employment faltered, traders took it as a sign that perhaps the RBA were not as confident with the labor market as they’d been letting on, which saw traders drive AUD to the bottom of the pack.
Still, it’s worth remaining level headed as it would be irresponsible for RBA not to discuss various scenarios, especially given that they’re neutral. So, like many other central banks, it’s all about the data and this makes Thursday’s employment data and next week’s CPI the more important. If the data goes against them, we have the playbook for a cut and to sell AUD. Yet today’s weakness appears like a knee-jerk reaction ahead of the facts, which could see its downside as limited ahead of these key data points.
Key points from RBA’s April minutes:
- No strong case for a near-term move in interest rates
- A rate cut would be “appropriate” if inflation stayed low and employment trended up
- Likelihood of a rate hike is low, given weak levels of inflation
- Economic effect of a cut would be less than previously
- Inflation likely to remain muted for some time
- Expects further gradual progress with labor market and CPI
- Slow growth at odds with improving labor market.
Today’s biggest mover is AUD/JPY, currently trading -0.46% lower. As Matt Weller flagged on Friday, AUD/JPY broke out of its 3-month range and today’s ‘dovish’ minutes has helped the pair retrace towards key support. For now, we’re patiently waiting to see if AUD/JPY can build a base above the original breakout level or, at the very least, hold above the bullish trendline on the four-hour chart. If the trend can hold, 80.73 is a likely interim resistance level, before the 82.20 highs come into focus as part of a 230-pip measured move from the prior range.
Get The App
AUD/USD struggled to re-test 72c ahead of the minutes, and today’s reaction has driven it back below the December trendline. Trading the daily timeframe has proven to be ricky, with most sessions switching direction and ranges overlapping (the opposite qualities we want from a decisive move). Therefore, whilst AUD/USD may have seen an interim top on the daily chart, momentum may be more favourable to intraday traders. Given the choppy nature of price action on the daily, we don’t think it’s a market to outstay ones’ welcome on, although 0.7110 support could provide bears with near-term target.
Disclaimer: The information and opinions in this report are for general information use only and are not intended as an offer or solicitation with respect to the purchase or sale of any currency or CFD contract. All opinions and information contained in this report are subject to change without notice. This report has been prepared without regard to the specific investment objectives, financial situation and needs of any particular recipient.
Any references to historical price movements or levels is informational based on our analysis and we do not represent or warrant that any such movements or levels are likely to reoccur in the future. While the information contained herein was obtained from sources believed to be reliable, the author does not guarantee its accuracy or completeness, nor does the author assume any liability for any direct, indirect or consequential loss that may result from the reliance by any person upon any such information or opinions.
Original post
Trading in financial instruments and/or cryptocurrencies involves high risks including the risk of losing some, or all, of your investment amount, and may not be suitable for all investors. Prices of cryptocurrencies are extremely volatile and may be affected by external factors such as financial, regulatory or political events. Trading on margin increases the financial risks.
Before deciding to trade in financial instrument or cryptocurrencies you should be fully informed of the risks and costs associated with trading the financial markets, carefully consider your investment objectives, level of experience, and risk appetite, and seek professional advice where needed.
Fusion Media would like to remind you that the data contained in this website is not necessarily real-time nor accurate. The data and prices on the website are not necessarily provided by any market or exchange, but may be provided by market makers, and so prices may not be accurate and may differ from the actual price at any given market, meaning prices are indicative and not appropriate for trading purposes. Fusion Media and any provider of the data contained in this website will not accept liability for any loss or damage as a result of your trading, or your reliance on the information contained within this website.
It is prohibited to use, store, reproduce, display, modify, transmit or distribute the data contained in this website without the explicit prior written permission of Fusion Media and/or the data provider. All intellectual property rights are reserved by the providers and/or the exchange providing the data contained in this website.
Fusion Media may be compensated by the advertisers that appear on the website, based on your interaction with the advertisements or advertisers.