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Today, the Aussie saw a mild rebound on general anti-dollar flows but tonight it faces the test of the week as RBA meets for it monthly rate decision. While we, like everyone else, expect them to remain neutral we believe there is a strong chance that the RBA’s tone may be decidedly dovish.
Australia may be on the verge of a counter-cyclical slowdown. While the rest of the world appears to be growing, Australia is facing a heavily indebted housing market, stagnant wage growth and slowdown in exports. All of this is likely to cause RBA to be exceedingly cautious with its language and perhaps even guide the Aussie towards the .7500 figure.
Today’s bounce was relatively anemic and unless the central bank provides traders with reason to be bullish the pair will have a hard time climbing much beyond .7700. In fact, if the central bank hints that the next move may be a CUT rather than a HIKE the Aussie could quickly tumble towards .7500 support.