The Australian Dollar was steady after April’s RBA rate decision; however, it may be heading for a reversal in the near-term. As anticipated, the Reserve Bank of Australia left rates unchanged at 1.50 percent which marks the longest streak of unchanged policy in the country’s history.
The Central Bank continues to reiterate that an unadjusted policy is consistent with meeting the CPI target and achieving sustainable development with time. In addition, Governor Philip Lowe repeated that inflation is likely to remain low for some time. Finally, the bank’s forecast for 2018 still calls for faster economic growth.
All in all, the RBA once again showed that there no hard and fast rule to fluctuate rates. Before the announcement, overnight index swaps were pricing in a 32.3% chance that one hike could be upon us by the year-end.
This slowness may bring increasing unlikeness. With the status quo update now behind, the Australian Dollar can now focus on upcoming domestic event peril and ever-present external ones.
Check out for this week’s local trade balance data. There, the surplus is expected to decrease to A$725m from A$1055m. Data out of the country has tended to show a decrease in performance relative to expectations that arose since mid-January. A downside surprise could hurt the Australian Dollar as it could open the door to a swampy GDP outcome in the future.
Going through the Technical chart & Analysis:
On a daily forex signal chart, AUD/USD has been struggling to push below 0.7651 which is the 76.4% Fibonacci retracement level. Interestingly, positive RSI divergence has emerged and it shows dwindling momentum to the downside. This may be an assumption that prices may flip in near future but still, it needs vindication for that.
If AUD/USD does end up turning higher, near-term resistance is the 61.8% level at 0.7743. A push above that exposes the resistance line of the falling wedge bullish pattern. If a breakout does occur, this could mean that the pair may keep climbing in a more considerable move.
On the other hand, prices may keep falling to near-term support which is the lower line of the wedge. Immediately following that is the long-term rising trend line that dates back to January 2016. A push below that exposes the December 10th low at 0.7501.
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