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Wait-and-See Reserve Bank of Australia (RBA) to Rattle AUD/USD Rebound

Wait-and-See Reserve Bank of Australia (RBA) to Rattle AUD/USD Rebound

2017-11-06 22:00:00
David Song, Strategist
Share:

- Reserve Bank of Australia (RBA) to Keep Cash Rate at Record-Low of 1.50%.

- Will Governor Philip Lowe & Co. Carry the Current Policy into 2018?

Trading the News: Reserve Bank of Australia (RBA) Interest Rate Decision

RBA Rate Decision

The Reserve Bank of Australia (RBA) interest rate decision may rattle the near-term rebound in AUD/USD as the central bank appears to be on course to carry the record-low interest rate into 2018.

With the RBA widely anticipated to keep the official cash rate at 1.50%, more of the same from Governor Philip Lowe & Co. may sap the appeal of the Australian dollar as the central bank remains in no rush to normalize monetary policy. As a result, an attempt to merely buy more time may spark a bearish reaction in the local currency, with AUD/USD at risk of giving back the advance from the summer months should the RBA continue to tame expectations for higher borrowing-costs.

However, AUD/USD may face a more bullish fate if the RBA unexpectedly shifts the monetary policy outlook and shows a greater willingness to implement a rate-hike over the coming months.

Impact that RBA interest rate decision has had on AUD/USD during the previous meeting

Period

Data Released

Estimate

Actual

Pips Change

(1 Hour post event )

Pips Change

(End of Day post event)

OCT

2017

10/03/2017 03:30:00 GMT

1.50%

1.50%

-9

+22

October 2017 Reserve Bank of Australia (RBA) Interest Rate Decision

AUD/USD 10-Minute Chart

AUD/USD Chart

As expected, the Reserve Bank of Australia (RBA) kept the cash rate at the record-low, with the central bank largely endorsing a wait-and-see approach for monetary policy as officials warn ‘slow growth in real wages and high levels of household debt are likely to constrain growth in household spending.’ The comments suggest Governor Philip Lowe and Co. will carry the record-low interest rate into 2018 as ‘inflation also remains low and is expected to pick up gradually as the economy strengthens.

The Australian dollar struggled to hold its ground as the RBA stuck to the sidelines, but the reaction was short-lived, with AUD/USD climbing back above the 0.7800 handle to end the day at 0.7835.

Interested in the market reaction to the RBA? Sign up & join DailyFX Currency Strategist Ilya Spivak LIVE to cover the interest rate decision!

AUD/USD Daily Chart

AUD/USD Daily Chart
  • Broader outlook for AUD/USD remains tilted to the downside as both price & the Relative Strength Index (RSI) retain the bearish formations from the summer months, but the pair stands at risk for a near-term rebound as it appears to be coming off of channel support.
  • The failed attempt to test the October-low (0.7625) brings the topside targets back on the radar, with a move back above the Fibonacci overlap around 0.7720 (23.6% retracement) to 0.7770 (61.8% expansion) opening up the next topside hurdle around 0.7850 (38.2% retracement) to 0.7860 (61.8% retracement),
  • However, a more meaningful break/close below the 0.7650 (38.2% retracement) hurdle raises the risk for a move down towards 0.7590 (100% expansion), with the next region of interest coming in around 0.7460 (23.6% retracement) to 0.7530 (38.2% expansion).

Planning to trade the RBA interest rate decision? Download the DailyFX Advanced Guide on Trading the News to start building a basic strategy.

--- Written by David Song, Currency Analyst

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

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DailyFX provides forex news and technical analysis on the trends that influence the global currency markets.

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