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Bearish Australian Dollar Outlook Targets 0.9000 on Dovish RBA

Bearish Australian Dollar Outlook Targets 0.9000 on Dovish RBA

2013-12-02 22:30:00
David Song, Gregory Marks,
Share:

- Reserve Bank of Australia (RBA) to Keep Cash Rate at 2.50%

- Governor Glenn Stevens to HighlightCurrency Intervention Threat?

Trading the News: Reserve Bank of Australia Interest Rate Decision

The Australian dollar may continue to give back the rebound from back in August (0.8846) should the Reserve Bank of Australia show a greater willingness to further embark on its easing cycle.

What’s Expected:

Time of release: 12/03/2013 3:30 GMT, 22:30 EST

Primary Pair Impact: AUDUSD

Expected: 2.50%

Previous: 2.50%

DailyFX Forecast: 2.50%

Why Is This Event Important:

Despite the threats of a currency intervention, the RBA may talk up bets for further rate cuts as the government delays the A$ 8.8B injection for the central bank, and we may see Governor Glenn Stevens adopt a more dovish tone for monetary policy in order to further assist with the rebalancing of the real economy.

Expectations: Bullish Argument/Scenario

Release

Expected

Actual

Construction Work Done (3Q)

0.5%

2.7%

Home Loan (MoM) (SEP)

3.5%

4.4%

Consumer Price Index (YoY) (3Q)

1.8%

2.2%

Despite the ongoing weakness in the real economy, the RBA may continue to highlight the threat of an asset-bubble to retain its current policy, and we may see a more meaningful rebound in the AUDUSD should Governor Stevens strike a more neutral tone for monetary policy.

Risk: Bearish Argument/Scenario

Release

Expected

Actual

Consumer Inflation Expectation (NOV)

--

1.9%

NAB Business Confidence (OCT)

--

5

Employment Change (OCT)

10.0K

1.1K

Nevertheless, the slowdown in inflation expectations along with the ongoing weakness in the labor market may undermine the RBA’s scope to retain its current policy stance, and the Australian dollar remains at risk of facing additional headwinds in 2014 as the government struggles to achieve its budget target.

Potential Price Targets For The Release

Join DailyFX on Demand to Cover Current AUDUSD Trade Setups

AUDUSD Daily

Forex_Bearish_Australian_Dollar_Outlook_Targets_0.9000_on_Dovish_RBA_body_Picture_2.png, Bearish Australian Dollar Outlook Targets 0.9000 on Dovish RBA

Chart - Created Using FXCM Marketscope 2.0

  • Continues Bounce Off of Trendline Support; Remains Capped by Former Resistance
  • Interim Resistance: 0.9250 (23.6 retracement) to 0.9290 Pivot
  • Interim Support: 0.8990 Pivot to 0.9000 (1.618 expansion)

How To Trade This Event Risk(Video)

Bullish AUD Trade: RBA Retains Neutral Tone; Warns of Asset-Bubble

  • Need green, five-minute candle following the statement for a potential long Australian dollar trade
  • If market reaction favors a long trade, buy AUDUSD with two separate position
  • Set stop at the near-by swing low/reasonable distance from entry; look for at least 1:1 risk-to-reward
  • Move stop to breakeven on remaining position once initial target is met, set reasonable limit

Bearish AUD Trade: Governor Stevens Talks Up Rate Cut/Currency Intervention

  • Need red, five-minute candle to consider a short AUDUSD position
  • Carry out the same setup as the bullish AUD trade, just in the opposite direction

Impact that Reserve Bank of Australia has had on AUD during the last meeting

Period

Data Released

Estimate

Actual

Pips Change

(1 Hour post event )

Pips Change

(End of Day post event)

NOV 2013

11/05/2013 3:30 GMT

2.50%

2.50%

+20

-22

November 2013 Reserve Bank of Australia Rate Decision

Forex_Bearish_Australian_Dollar_Outlook_Targets_0.9000_on_Dovish_RBA_body_Picture_1.png, Bearish Australian Dollar Outlook Targets 0.9000 on Dovish RBA

The brief RBA policy statement last month once again mentioned the impact of a higher Australian Dollar on balanced growth while saying that inflation is currently consistent with their medium-term targets. With AUD/USD down almost 4% since the last rate decision, market participants will be looking for statements regarding the Aussi as it continues to press new monthly lows amidst a lack of support for commodity bloc currencies. Mr. Stevens may attempt to use the central bank statement to weaken the Aussi further if he feels the momentum must continue to the downside. Remember, Australian GDP will follow the RBA at 00:30GMT on Wednesday.

--- Written by David Song, Currency Analyst

To contact David, e-mail dsong@dailyfx.com. Follow me on Twitter at @DavidJSong.

To be added to David's e-mail distribution list, please follow this link.

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