AUD/USD Ignores RBA Decision in Favor of Equities, Trade War News
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TALKING POINTS – AUD/USD, RBA, EQUITIES, TRADE WARS
- Aussie Dollar gained slightly after RBA maintained 1.50% OCR at October meeting
- AUD/USD remains in dominant downtrend channel, eyeing Dec 2016 support levels
- US ISM figures, global equities’ strength, and trade wars in the spotlight next
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The Australian Dollar was barely higher against its US namesake as the Reserve Bank of Australia maintained its overnight cash rate at the record low of 1.50% at its October meeting. The monetary authority stated that low interest rates continue to support the local economy, adding that it also sees inflation in 2019 and 2020 to be higher than the current 2%. It also noted that the unchanged policy would be consistent with sustainable economic growth and meeting the CPI target over time.
AUD/USD Chart (5-minute)
The central bank’s decision to keep the record low OCR was widely expected. Aussie Dollar has suffered against the greenback for the majority of this year, intensified by interest-rate differentials through hawkish moves from the FOMC. AUD/USD breached December 2016 lows near the 0.716 figure, testing 0.70 before engaging in an inverse Head and Shoulders bullish reversal candlestick pattern. Traders should look for confirmation via a break above the descending channel, before considering next moves.
AUD/USD Chart (Daily)
Looking forward, the Australian Dollar faces the release of August’s trade balance and building approvals data in the next week. AUD/USD may also be impacted by September’s US ISM Non-Manufacturing/Service Composite figures, as well as the local unemployment rate and change in non-farm payrolls. Furthermore, the sentiment-linked Aussie Dollar will closely watch global stocks, as they may potentially slow down to mirror global economic growth. Trade wars will also continue to weigh on the pro-risk unit, which may be influenced by the effects of reciprocal tariffs between the United States and China, as well as the renegotiated NAFTA “USMCA”.
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--- Written by Megha Torpunuri, DailyFX Research Team
DailyFX provides forex news and technical analysis on the trends that influence the global currency markets.