RBA kept its interest rate level unchanged at +1.50%, as was expected during today’s Asian session and AUD weakened against the USD at the release. In its accompanying statement the bank mentioned the tightening of the Australian labour market, which could in turn lead to some inflationary pressures according to analysts. We must also note that the bank maintains the view of the outlook for the global economy remaining reasonable despite growth slowing down and downside risks having increased. It should also be noted that the bank seems to keep low expectations for inflation at the current stage. The release gains on importance as the country’s government is about to release an annual budget which could include tax cuts and infrastructure spending, a stimulus which could weaken possibilities of a future rate cut by RBA. AUD/USD dropped during the Asian session today, aiming for the 0.7065 (S1) support line after the announcement of RBA’s interest rate decision. We could see the Aussie remaining on the retreat in the short term and should the pair weaken even further we could see it aiming if not breaking the 0.7065 (S1) support line. Should on the other hand the pair’s long positions be favoured by the market, we could see the pair aiming if not breaking the 0.7120 (R1) resistance line.
Pound corrects lower during today’s Asian session, as Brexit uncertainty intensifies.
The GBP strengthened yesterday on hopes of a softer Brexit, however during today’s Asian session, corrected lower. The pound retreated as the UK Parliament rejected all four options that were presented to replace Theresa May’s deal, providing no solution to the issue. The failure of the UK Parliament to reach an alternative practically renders the UK no plan B, with the possibility of the UK crashing out of the EU getting stronger. According to media reports, the UK government is about to confront a Brexit crisis after the UK Parliament run into a stalemate yesterday. Analysts mention that the possibility of a general election could mark the beginning of a break in the deadlock, however we retain our reservations about the possible outcome of such a development, especially as such a scenario may necessitate the UK to remain within the EU for a longer period and take part in the EU parliamentary elections. As all possibilities are still open, Brexit uncertainty seems to persist and thus we expect the pound to remain under pressure. Cable rose and clearly broke the 1.3070 (R1) resistance line during yesterday’s European session, however corrected lower later on and during today’s late Asian session, once again landed below the prementioned resistance line. We expect the pair to maintain a bearish momentum as Brexit uncertainty seems to persist. It should be noted though that the financial releases today could provide some support for the pair at certain points. Should the bears dictate the pair’s direction, we could see it aiming if not breaking the 1.2970 (S1) support line. Should on the other hand the bulls take over, we could see the pair breaking the 1.3070 (R1) resistance line and aim for the 1.3175 (R2) resistance level.
Other economic highlights, today and early tomorrow
In today’s European session, we get UK’s Construction PMI for March, while in the American session, we get the US durable goods orders growth rates for February. During tomorrow’s Asian session, we get the Australian retail sales growth rate as well as the trade balance figure, both for February.
AUD/USD H4
Support: 0.7065 (S1), 0.7005 (S2), 0.6950 (S3)
Resistance: 0.7120 (R1), 0.7190 (R2), 0.7245 (R3)
GBP/USD H4
Support: 1.2970 (S1), 1.2875 (S2), 1.2785 (S3)
Resistance: 1.3070 (R1), 1.3175 (R2), 1.3265 (R3)
