RBA remained on hold at +1.50% as was widely expected and the AUD initially had little reaction, however later it started to rise. The accompanying statement kept the outlook for employment positive and assessed the Australian economy as performing well, with the GDP expected to average around 3.5% yoy in 2018. Interestingly enough, the bank projects a gradual acceleration of the inflation rate, with the central scenario being for it to reach 2.25% yoy in 2019. Also at the same time, it notes that the global economic expansion is continuing however there are signs of a slowdown in global trade, stemming from trade tensions. Given that the next RBA meeting is scheduled well into 2019, we expect the AUD to remain data driven and trade related in the near future.
AUD/USD had little reaction at the release of RBA’s interest rate decision, but technically, the fact that it clearly broke the 0.7380 (S1) resistance line (now turned to support), could create hopes for the pair to rise further. We could see the pair continuing to rise should the USD side of the pair continue to weaken. Please note though, that the RSI indicator in the 4 hour chart, is nearing the reading of 70. Should the bulls dictate the pair’s direction, we could see it breaking the 0.7415 (R1) resistance level and aim for the 0.7485 (R2) resistance hurdle. On the other hand, should the bears take over, we could see it breaking the 0.7360 (S1) and aiming for the 0.7315 (S2).
USD weakens as US bond yields fall
The USD weakened during the Asian session today as US treasury yields were reported to have fallen. As the US 10 year bond yields are dropping, analysts are focusing on a possible inversion of the yield curve especially the 2-10 year yield curve, as such an inversion could be an early sign of a possible recession for the US. Analysts note that falling US bond yields are a negative for the USD and that currently are near crucial technical support levels, which if broken could provide further pressure on the greenback. We expect volatility for the USD in the coming week as the US employment report release draws near, while on the other hand the effect of the temporary truce agreed between US president Trump and Chinese president Xi continues to affect its direction.
USD/JPY dropped during today’s Asian session, breaking the 113.25 (R1) support level (now turned to resistance). We could see the pair continuing its drop should the USD side continue to weaken during the day. If the pair remains under the selling interest of the market, we could see it breaking the 112.72 (S1) support line, while if the market favors the pair’s long positions we could pair breaking the 113.25 (R1) support line and aim for the 113.95 (R2) resistance level.
In today’s other economic highlights:
In today’s European session, we get UK’s Construction PMI for November, however there may also other events affecting the pound’s direction today. Bank of England Governor Mark Carney speaks to parliament’s Treasury Committee about the central bank’s report on what Brexit might mean for Britain’s economy. Derided as “Project Hysteria” by Brexit supporters, Carney may be under pressure.
AUD/USD H4
Support: 0.7360(S1), 0.7315 (S2), 0.7280 (S3)
Resistance: 0.7415 (R1), 0.7485 (R2), 0.7540 (R3)
USD/JPY H4
Support: 112.72 (S1), 112.15 (S2), 111.60 (S3)
Resistance: 113.25 (R1), 113.95 (R2), 114.50 (R3)
