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Clues before the RBA’s decision

Australia will release third-quarter inflation figures early Wednesday. The quarterly CPI is expected to stand at 1.5%, a big recovery from the -1.9% previously. Compared to a year earlier, it is expected to recover from -0.3% to 0.7%. It is expected that The Reserve Bank of Australia’s cut average CPI is 0.3% QoQ, from the previous -0.1%, and 1.1% year-on-year from 1.2% in the second quarter. A significant improvement that does not reach the target range of 2-3% of the RBA.

Minutes from the last central bank meeting showed that monetary policymakers are inclined to follow current inflation than their own forecasts, which means there is a good chance the market will be quick to discount in price. the RBA’s possible reaction to inflation figures. If the figures do not meet market expectations, a 0.1% cash rate cut could be taken for granted by the next meeting, on November 4, with AUD / USD likely falling towards the round 0.7000 level.

However, the market expects better data than the previous ones, based on the easing of restrictions in the Victoria region. Despite the RBA paving the way for a rate cut, the outlook for policy makers is generally positive. They continue to reaffirm that the economic slowdown was not as bad as it was initially estimated. In this stage, optimistic data could offer support to the Australian dollar. Still, the AUD has limited upside potential, amid caution before the next RBA meeting.

Technical perspective of the AUD / USD

From a technical point of view, the AUD / USD pair is neutral in the medium term, staying above the 0.7100 level. The daily chart shows that the pair has spent the week trapped within a narrow range defined by the 20- and 100-day simple horizontal moving averages. Meanwhile, the technical indicators are going nowhere around their mid-lines.

The same graph shows that the pair bottomed out at 0.7005 in September and in 0.7020 in October. An intermediate support level is 0.7070, with a break below the latter exposing the 0.7000 area. Looking up, 0.7160 is the first resistance level, ahead of the price zone of 0.7210/40.

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Credits: Forex Street

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