RBA rate decision will be the major focus in upcoming Asian session. Expectations of rate cut intensified after Governor Philip Lowe said on May 21, “at our meeting in two weeks’ time, we will consider the case for lower interest rates.” The core reason behind RBA’s change in stance is that it now sees that unemployment rate could sustain below 5% without raising inflation concerns. Additionally, after April’s rise from 5.0% to 5.2% in unemployment rate, it’s “less likely” that “current policy settings are sufficient to deliver lower unemployment.” Thus, RBA would likely opt for loosening monetary policy to restart the downtrend in unemployment rate for lifting inflation.
Hence, it’s generally expected that RBA will lower cash rate from 1.50% to 1.25% tomorrow. The question is whether that’s enough to achieve RBA’s purpose. And, would RBA signal more rates cuts are coming. Markets are generally expecting one to two more rate cuts this years. They’d certainly like to have such expectations affirmed.
Here are some readings on RBA:
- Lowe’s full speech The Economic Outlook and Monetary Policy.
- AUD/USD Hits A 3-Week High Ahead Of Key RBA Meeting
- RBA to Cut Rates, But Will It Signal Aggressive Easing?
- RBA to Cut the Cash Rate to 0.75% by November; AUD to USD0.66 by End 2019
As for Australia Dollar, it’s actually stabilized a lot and even tried to stay rebounds in the past two weeks. Election results was a supportive factor. Also strong Iron ore price and exports also kept the Aussie buoyed. Additionally, expectations of a Fed cut also intensified.
Still, there is no sign in general bullish reversal in Aussie yet. For example, AUD/JPY’s decline in 80.71 is still in progress for 61.8% retracement of 70.27 to 80.71 at 74.25. Sustained break will pave the way to retest 70.27 low. Break of 76.39 resistance might bring stronger rebound and lengthier consolidation. But outlook won’t turn bullish before sustained trading above 55 day EMA.
AUD/CAD’s strength is also not totally convincing yet despite the rebound from 0.9201. Before sustained trading above 55 day EMA, outlook will stays bearish. Break of 0.9316 minor support will suggest that the rebound form 0.9201 has completed. Deeper fall should then be seen back to 0.9201 and possibly further to 0.9105 low.
