RBA
AUDJPY BULLS IN CONTROL AS RATES RAISEDThe Reserve Bank of Australia (RBA) has adopted a hawkish stance on interest rates.
The RBA raised its OCR by 50 basis points to 0.85 percent, above the 25 basis point rise predicted.
In April, the Australian economy added only 4k jobs, compared to the 30k predicted. As a result, market participants saw a 25 basis point rate increase as merely tightening monetary policy.
Meanwhile, the Bank of Japan's (BOJ) ultra-easy monetary policy will continue to haunt the yen bulls.
BOJ Kuroda's intervention fails despite the fact that the pair is overbought.
Haruhiko Kuroda, Governor of the Bank of Japan (BOJ), interjected verbally, stating that the large yen depreciation in a short period of time is detrimental to the Japanese economy.
A Kangaroo Hop!Things seem to be going well down under. With Iron Ore prices jumping close to 8% last week, Australia, the largest exporter of the raw material stands to benefit greatly. In 2021, Iron Ore exports totaled close to US$120 billion. This contributes greatly to the demand side pressure on the Australian dollar.
Looking at the charts, the AUDUSD pair is currently trading at the bottom of the channel support on the 1-hr time frame. With the 200-period moving average right below current levels, we think downside resistance will prove strong and prices will bounce off the bottom of the rising channel quickly.
Stay tuned to the Reserve Bank of Australia’s meeting tomorrow and time your entry there! Assuming no surprises and the technical supports are intact, we favor the long side for the AUDUSD pair.
Entry at 0.7190, stop below 0.712. Targets are 0.7346 and 0.7460.
Disclaimer:
The contents in this Idea are intended for information purpose only and do not constitute investment recommendation or advice. Nor are they used to promote any specific products or services. They serve as an integral part of a case study to demonstrate fundamental concepts in risk management under given market scenarios.
RBA and May31 Rate DecisionFundamentals:
The RBA in December's meeting was a hawkish stance. This suggests that going forward, their monetary policy will continue to be hawkish. Coupled with that, given the pandemic's effects on the Australian economy, the Australian government's fiscal policy will be at the forefront of their minds in stimulating their economy. This is a two for one punch and should have effects on the Australian currency.
Conclusions:
We have a country that is forced in a corner to take action by their own desire and resolve to prop up their economy. We have a situation where risk has the potential to prevail should the economy is able to recover from the lockdown measures that took place recently. We have a populace that is mobile, able and ready to work should the pandemic situation has improves. This is potentially, good news for the currency.
Trades:
AUDNZD and AUDUSD
Aussie slips after strong NFP reportThe Australian dollar has reversed directions on Friday. AUD/USD is trading at 0.7225, down 0.55% on the day.
US nonfarm payrolls are traditionally the highlight of the week, but the Ukraine war, spiralling inflation and surging oil prices have taken up much of the market's attention. This has reduced some of the hype around recent NFP releases, but they still have the potential to move markets.
The May nonfarm payrolls report outperformed expectations, with a gain of 390 thousand, above the forecast of 325 thousand. We'll have to give the markets some time to digest the reading, but it's certainly possible that the strong numbers will see investors price in more Fed tightening, which will give the US dollar a boost, especially against the risk-sensitive Australian dollar. AUD/USD has already reacted to the NFP with considerable losses. It will be interesting to see how Fed policy members react to the nonfarm payrolls release, and whether some Fed members call for the Fed to increase the pace or extent of tightening.
The Reserve Bank of Australia holds its policy meeting on Tuesday and will continue its rate-tightening cycle. The current benchmark rate is only 0.35% and the Bank is widely expected to hike by 0.35%, which would represent a compromise between a 0.25% and a 0.50% move. With inflation continuing to accelerate, the RBA is expected to raise rates to 3% or even higher, which means that we will likely see the RBA raising rates throughout the second half of the year and into 2023.
AUD/USD is testing resistance at 0.7207. Above, there is resistance at 0.7252
There is support at 0.7121 and 0.7076
AUD drifting ahead of retail salesThe Australian dollar started the week with gains of close to one percent but has been mostly drifting since then. AUD/USD is trading quietly, just below the 0.71 line.
It hasn't been a very good week on the Australian release front, raising concerns that the economy may be slowing down. Manufacturing and Services PMIs both slowed in May, while Construction Work Done and Private New Capital Expenditure both recorded declines in the first quarter. The week winds up with April Retail Sales on Friday, which is projected to slow to 0.9%, after a 1.6% in March. Australia releases GDP next week, and an underperforming release would likely dampen sentiment towards the Australian dollar.
The new Labour government is rolling up its sleeves after its election victory and getting to work. Both Labour and the defeated Liberal party made campaign promises to review RBA operations, including how it targets inflation. The new Treasurer, Jim Chalmers, says he will announce his findings shortly. Chalmers said on Wednesday that he had inherited "very tricky" economic conditions, including rising inflation and interest rates, and a massive trillion-dollar debt.
The FOMC minutes didn't contain any surprises, which actually soothed nervous markets. Investors have become increasingly concerned that the US economy might tip into recession. Recent data, such as housing, has been weak, while at the same time that the Federal Reserve has embarked on an aggressive rate-hike cycle aimed at slowing the economy and containing inflation.
With inflation still not showing signs of peaking, there have been calls from some Fed officials to deliver a super-super-size 75 bps hike. To the relief of the markets, the minutes appeared to put to rest such a drastic move, as the Fed signalled that it will hike by 50 bps in June and July, followed by a pause in September. This would allow the Fed to monitor the effects of the June and July hikes on the economy and on inflation levels.
0.7118 is a weak resistance line. Above, there is resistance at 0.7196
There is support at 0.6996 and 0.6918
AUD to challenge USD for the throne of King CurrencyAUD/USD has been belted in recent weeks as the USD bullied every major FX pair. The selling is overdone and into major support ahead of the FOMC meeting tonight.
Yesterday the RBA raised rates by 0.25% to 0.35% and we have begun the rate hike cycle with the central bank refocused on inflation.
We look for buy the rumour sell the fact USD selling tonight after the FED rate hike or for the bond market to begin pricing in more Australia rate hikes than currently priced in.
Increased Retail Sales Can Be a Positive SignAfter experiencing problems with Covid that disrupted business, of course, it would have an impact on people's purchasing power. Of course, during the recovery period from Covid, Australia was one of the countries that scored a trade balance surplus and retail sales continued to increase. Retail sales in Australia rose 1.6% for the third straight month, results in March showed that retail sales hit a record high of AUD 33.63 billion after a record high, amid continued easing of restrictions. Household goods retail, up 3.4% followed by other retail (2%), cafe, restaurant and takeaway food service (2%), department store (4.1%), food retail (0.5%) and clothing, footwear (0.5%) . Sales in Queensland (3.4%) and New South Wales (1.8%) saw the biggest gains after recovering from floods and extreme rainfall.
Indicates that the Australian economy is recovering. Of course this will have an impact on the strengthening of the AUD currency. In monetary policy, the RBA has raised its interest rate by 25 BPS which makes market participants believe that further strengthening will occur for this currency.
Market Direction
By looking at the above phenomenon, it is certain that the strengthening of the AUD currency in the future can last a long time because it is predicted that the Australian central bank will raise interest rates to reduce the impact of prolonged inflation coupled with positive economic growth.
above will affect the pair:
Pair AUD/JPY Bullish
Entry Buy
S1: 90,603
S2: 88,794
S3: 86,954
Take Profit
R1: 94,697
R2: 96,920
R3: 98.614
Today’s Notable Sentiment ShiftsAUD – The Australian dollar rallied on Tuesday after the RBA raised rates by more than expected and signalled further moves ahead, leading investors to wager on a faster tightening in the coming months.
The central bank announced a 25 basis point rate hike, taking the Cash Rate to 0.35%, versus consensus for a 15 basis point rate hike, which would have taken the Cash Rate to 0.25%.
Commenting on the announcement, NAB queried “does it mean that they will do 40 basis points in June, so we are up to 75 basis points? It is certainly possible. It looks like their narrative and the inflation forecasts that they’re hinting at comes across as fairly hawkish.”
Aussie stable ahead of RBA decisionIt was another tough week for the Australian dollar, as AUD/USD fell 2.53%. In the European session, AUD/USD is trading quietly at 0.7046.
The RBA will be in the spotlight, as it holds its policy meeting on Tuesday. This meeting is live, as it's unclear what policy makers have planned. There's little doubt that the RBA is poised to embark on a rate-hike cycle, keeping in sync with the Federal Reserve and other major central banks.
The uncertainty lies in whether the Bank will raise now, and if so, by how much. Inflation continues to spiral, hitting 5.1% in the first quarter. RBA Governor Lowe has long insisted that he would not raise rates until wage growth rose in order to ensure that inflation was not transitory. Well, wage growth is accelerating and nobody is using the T-word when describing inflation. With a robust labour market, the conditions are right for changing gears and moving away from the bank's loose monetary policy.
A rate hike of 0.40% would be called for, but there is the issue of the federal election later this month. The RBA does not want to deliver an oversize rate hike in the middle of an election campaign, but at the same time needs to send a message to the markets that it is determined to contain inflation - standing on the sidelines would risk credibility. The compromise (which is the consensus) is that the RBA will raise rates, but only by 0.15%, with a further hike at the June meeting. A small hike will not send inflation on its heels by any stretch, but will send a slightly hawkish message, as this would be the first rate hike since 2011.
With the Federal Reserve widely expected to raise rates by a half-point at its meeting on Wednesday, the Aussie could find itself under pressure this week, as it struggles to remain above the symbolic 0.70-line.
There is support at 0.6992 and 0.6923
AUD/USD has resistance at 0.7125 and 0.7194
Interest rates, Inflation and how to trade it.Hey Traders,
Massive week this week fundamentally for the Forex market. 3 big interest rate decisions being released so I thought there was no better time than now to have a chat about what it is, what it indicates and finally, how traders profit from it. Fed and BOE almost guaranteed to hike rates, RBA is sitting unsure.
Have a watch of the video and I am more than happy to have a discussion in the comment section!
As always, have a fantastic trading week and I wish you all many profits.
AUDCHF Heading to the downside? (FUNDAMENTALS)Hey Traders,
AUD is showing weakness as the RBA are ready to start hiking rates, this data is usually already priced into the market but it is the meeting minutes which indicate where we are heading into the future. Also expecting lower retail sales data later in the week.
CHF is looking rather bullish, on the other hand with not much room for the Monetary Policy to ease the outlook is rather Dovish. The data releases do remain weak but with stocks heading lower I can see money flooding into the CHF.
As you can see by the chart, we have formed and broken a clean flag pattern on the 4h timeframe. Keep an eye on how this chart runs and the reaction to the interest rate hikes by the RBA.
Good luck traders!
Australian dollar rebounds on hawkish RBAThe RBA sent a hawkish message to the markets, as the minutes from the April meeting provided a strong hint that a rate hike is coming sooner than had been expected. The minutes cited rising inflation and a tightening labor markets as developments that have "brought forward the likely timing of the first increase in interest rates".
The last time the RBA raised rates was back in 2010, so the markets are eagerly awaiting the lift-off of what is expected to be a rate-hike cycle. All four of Australia's major banks are predicting that the RBA will hit the rate trigger in June. With Australians going to the voting booths on May 21st, the RBA would prefer to stay quietly on the sidelines in the middle of an election campaign. Still, the May meeting should be considered live, at least until the April inflation report comes out on April 27th. A sharp gain in CPI could force the RBA to respond with a rate hike in May, with a strong possibility of a large hike of 0.40%.
Things appear much simpler for the Federal Reserve, which is widely expected to increase rates by 0.50% at its meeting in early May. Fed members, including the more dovish ones, have been sending out the message that the Fed must take aggressive action in order to contain soaring inflation, which hit 8.5% in March. On Monday, Fed member Bullard, a hawk, said that the Fed rate might need to rise to a "neutral" rate of 3.50% and suggested that a 0.75% hike was a possibility. Bullard's stance isn't a reflection of Fed policy, but the very suggestion of a 0.75% hike illustrates that the Fed plans to come out swinging come May.
There is resistance at 0.7427, followed closely at 0.7462
There is support at 0.7324 and 0.7256
What is going on with AUD?AUD/USD has baffled trading breaking out of the years range to the topside last Tuesday after the RBA changed to a hawkish stance.
AUD/USD rally was reversed sharply later in the week as US yields exploded and Oil eased back on Chinese lockdowns.
Still market is expecting RBA to raise in June now so if the USD rally based on US Bond yields can stop or reverse then the AUD is in poll position to rally first.
Big cluster of support here with 0.7380 old support and 0.7350 the trendline support for the whole uptrend.
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GET READY FOR SHORTFX:EURAUD
The correction that occurred in the Australian currency was caused by a decrease in the trade balance in that country, causing corrections in several Australian currency pairs such as, AUD/USD , GBP/AUD , EUR/AUD and so on.
Bearish potential still exists in the pair EUR/AUD
Need to be careful, the rising inflation rate in Europe due to the turmoil of war, made the ECB want to raise interest rates in order to reduce the impact of inflation. This could cause an upward correction for the Euro.
Australian currency correctionFX:GBPAUD
The correction that occurred in the Australian currency was caused by a decrease in the trade balance in that country, causing corrections in several Australian currency pairs such as, AUD/USD, GBP/AUD, EUR/AUD and so on.
Bearish potential still exists in the pair GBP/AUD
AUD/USD Outlook (5 April 2022)Overall, AUD/USD have been trending upwards. Following the RBA rate decision and statement, the AUD/USD rose significantly.
The Reserve Bank of Australia rate decision to be released on Tuesday (5th April), indicated:
- Unemployment rate to fall to below 4 per cent this year and to remain below 4 per cent next year.
- Inflation has increased in Australia, but it remains lower than in many other countries; in underlying terms, inflation is 2.6 per cent and in headline terms it is 3.5 per cent.
-The Board has wanted to see actual evidence that inflation is sustainably within the 2 to 3 per cent target range before it increases interest rates.
These signalled for earlier rate increases possibly in May (previously expected towards the end of the year)
Following the trend, look for buying opportunities of AUD/USD if price continues to break above the resistance zone of 0.76000. Next resistance zone is at 0.78000.
AUDCHF: Trend Continuation Likely As Prices Could Aim For 0.72!With rising inflation, the commodities linked currencies such as the AUD are set to keep appreciating in the near future! whereas on the other hand, the safehaven currencies such as the JPY and in this case the CHF, are all but set to drop in value in the coming months. This vast difference is based on the country's economic policies outlook. Here we are looking at the AUDCHF weekly chart and based on the fundamental outlook, trend continuation is a likely scenario.
Now coming to the technical analysis part, AUDCHF has been in an uptrend for a long time and currently the price has tested the 0.70000 psychological resistance. The next resistance beyond 0.7000 lies at the 0.72000 region, however for this target to be attained, the concrete psychological resistance of 0.7000 must be cleared.
The main criteria for this trade to be valid in this scenario would be for the monthly candle to close above 0.70000 psychological resistance. This would likely ensure that the level is cleared and thus the prices are ready to head higher. The stop loss should be placed beneath the rising weekly trendline and swing low. The take profit should be set at the next swing high, which is the 0.72000 region. Once the criteria is met, as for all the trades, a 1:1 RR is necessary to manage the risk. In this case we need to wait for the price to retrace if the criteria is met. Retracement should hit 0.68000 level after which a LONG trade could be executed. This would ensure we have a 1:1 RR.
However shall the criteria be met and the take profit is hit first, then the trade becomes invalid!. Have a look at the main chart for clear picture on the instruction and explanation above.
Cheers, I hope you find this insight helpful. Please LIKE & FOLLOW for more insights into Major & Minor currency pairs.
AUDUSD: Await Retrace Before Going LONG! 0.75000 The TargetWith weekly candle breaking out from the descending channel, the price is ready to target the next high at 0.75000. The price also formed good support at 0.70000 area with RSI indicating a bullish divergence!
With that all said, it is advisable to wait for the price to retrace at the desired level and then execute a LONG trade. Trade can be invalidated if 0.75000 is HIT first. To get a clear picture have a look at the main chart.
Cheers
ridethepig | Australian Yields for the Yearly Close📌 @ridethepig AU02Y Market Commentary 18.12.2020
This position which arises after the telegraphed breakout from the 10Y and thus creates space for the front end. A typical manoeuvre for the AU and NZ yields:
The analysis of the starting position shows us that the control now exists on the bid; because we know that it is the path of least resistance, so the rule is; when the market is strong we are buyers and when weak, we are sellers.
The AUD which is being "flanked" from all sides (FED, RBNZ et al) now has commodity shortages entering into play to put the cherry on top. Remain bid AUD for as long as possible; maintain contact with commodities for this cycle.
Thanks for keeping the feedback coming 👍 or 👎
Australian dollar pauses after strong gainsThe Australian dollar is showing limited movement on Tuesday, after posting sharp gains at the start of the week. In the North American session, AUD/USD is trading at 0.7133, up 0.10% on the day.
There are no tier-1 events out of Australia this week, but the data released this week is pointing upwards. The AIG Performance of Services Index for December and January punched past the 50-level into expansion territory, with a reading of 56.2, up from 49.6 beforehand. This was the first reading showing expansion in five months. This was followed by an excellent retail sales report for Q4, with gains of 8.2%, which was above expectations.
Earlier today, the NAB Business Confidence survey in January jumped 15 points to +3, after a miserable -12 reading in December. However, the survey noted that business conditions weakened. With the government announcing that it will reopen the international borders and allow tourists in later this month, the economy should get a significant boost.
At last week's RBA meeting, Governor Lowe said that a hike could be a year away or even longer, but the markets aren't buying it. Lowe is clearly in no rush to raise rates and may not have abandoned the view that inflation is transient and will ease in the near term. The markets, in contrast, are more hawkish and feel that high inflation will prompt the RBA to raise rates in the second half of 2022.
In the US, we'll get a look at key inflation data on Thursday. The numbers could have an impact on the size of the expected rate hike next month. The markets have priced in a 33% chance of a 50-basis points hike. The Fed generally sticks to quarter-point moves, but may feel the need to inject a large hike in order to hit hard at inflation and res-establish credibility after taking heat for waiting too long to tighten policy.
AUD/USD faces resistance at 0.7168 and 0.7258
There is support at 0.6987 and 0.6896
AUD/USD is near the 50% Fib of 0.7314-0.6968
Aussie steady as rally fizzlesThe Australian dollar headed lower earlier in the day before recovering. In the North American session, AUD/USD is trading at 0.7137, down 0.01% on the day.
The RBA policy meeting went as expected, with the bank winding up its bond asset programme while preaching caution. Governor Lowe stressed that the end of QE did not mean that a rate rise was imminent and remained non-committal, saying that a hike could be a year away or even longer. Lowe reiterated that there are significant uncertainties as to recent inflationary pressures and that it was too early to determine if inflation was sustainably within the central bank's 2%-3% target band and said that there was no need to respond aggressively to inflation.
Lowe is clearly in no rush to raise rates and may not have abandoned the view that inflation is transient and will ease in the near term. The markets, in contrast, are more hawkish and feel that high inflation will prompt the RBA to raise rates in the second half of 2022.
Wage growth remains an obstacle to a rate hike, according to the RBA. Governor Lowe has stated that he will not raise rates prior to wage growth rising to 3.0%. We'll get a look at the 2022 forecast for wage growth on Friday when the RBA releases its monetary policy statement. The current projection stands at 2.5%, but if the bank revises this forecast upwards, it would reinforce expectations of a rate hike later in 2022.
The RBA has been in the spotlight this week, overshadowing some positive economic releases. Building Approvals for December jumped 8.2% m/m, surprising the markets which had projected a 1.0% decline. The NAB business confidence index sparkled in Q4, climbing to 18, up from -2 beforehand. The end of Covid lockdowns invigorated the economy and gave a massive boost to business confidence.
AUD/USD continues to test resistance at 0.7133. Above, we find resistance at 0.7271
There is support at 0.6913 and 0.6831
Aussie rises as RBA maintains ratesThe Aussie has rebounded nicely this week, recovering half the losses from last week, when it tumbled 2.5%. AUD/USD has edged higher and is trading just below the 0.71 level in the European session.
There were no surprises from the RBA policy meeting earlier today. The central bank held the Cash Rate at a record low of 0.10% and announced that it would wind up its bond purchase program in February.
The RBA had expected to retire the bond purchase scheme in May but brought the date forward due to better than expected employment and inflation data for December. The unemployment rate has fallen to 4.2%, while Core CPI is at 2.6%, in the middle of the RBA's target band of 2%-3%. These strong numbers could justify a rate hike, but the RBA has stuck to a dovish script, and Governor Lowe has tried to dampen rate hike expectations by saying that the bank will not before wage growth rises to 3%, which is not expected until 2023. In his statement, Lowe acknowledged that inflation had picked up, but said that it was too early to conclude that it was "sustainably" within the target band."
The markets remain more hawkish about a rate hike and priced in a move in the second half of the year. Investors are betting that Lowe will have to hike before achieving his wage growth target due to surging inflation. Any hints from the RBA about a rate hike would be significant, as the bank last raised rates back in 2010.
The -4.2% reading came after five successive gains and was the sharpest drop since April 2020. This missed the consensus of a 3.9% gain. The Omicron variant has weighed heavily on consumer spending and this may be reflected in January and February retail sales reports as well.
AUD/USD faces resistance at 0.7133. Above, we find resistance at 0.7271
There is support at 0.6913 and 0.6831