RBA shift boosts AUDUSD
Tony Sycamore December 7, 2021 4:51 AM
As widely forecast, the RBA elected to keep interest rates on hold this afternoon at 0.1%. However, a subtle adjustment in the last paragraph appears to have eased its dovish forward guidance.
The RBA noted the economic recovery is gaining traction, “Household consumption is rebounding strongly and the outlook for business investment has improved,” and that the Omicron variant was not expected to derail the recovery.
Notably, the forward guidance in the last paragraph was a truncated version of the one from the November statement and simply said, "This is likely to take some time, and the Board is prepared to be patient," opening up the possibility for an early rate rise.
The cautiously optimistic tone around the re-opening of the Australian economy combined with the modification to the last paragraph provides the interest rate market with some unexpected encouragement that the RBA will lift interest rates earlier than expected.
Post the statement, the AUDUSD has rallied about 16 pips from .7058 to a high of .7075, tentatively building on the recovery that commenced overnight on better risk sentiment and following a cut by China to the Reserve Ratio Requirement (RRR).
Technically, providing the AUDUSD holds above the critical .7000c/.6990c support level, a stronger recovery back towards resistance at .7170/80 is possible to work off extreme oversold readings as viewed on the RSI indicator below and to reflect the RBA’s subtle shift.
A move above .7170/80 would then likely trigger a more robust recovery as medium-term trading accounts move to cover shorts established on the sell-off from the late October .7555 high.
Source Tradingview. The figures stated areas of December 7th, 2021. Past performance is not a reliable indicator of future performance. This report does not contain and is not to be taken as containing any financial product advice or financial product recommendation
How to trade with City Index
You can trade with City Index by following these four easy steps:
Open an account, or log in if you’re already a customer
• Open an account in the UK
• Open an account in Australia
• Open an account in Singapore
- Search for the company you want to trade in our award-winning platform
- Choose your position and size, and your stop and limit levels
- Place the trade
StoneX Financial Ltd (trading as “City Index”) is an execution-only service provider. This material, whether or not it states any opinions, is for general information purposes only and it does not take into account your personal circumstances or objectives. This material has been prepared using the thoughts and opinions of the author and these may change. However, City Index does not plan to provide further updates to any material once published and it is not under any obligation to keep this material up to date. This material is short term in nature and may only relate to facts and circumstances existing at a specific time or day. Nothing in this material is (or should be considered to be) financial, investment, legal, tax or other advice and no reliance should be placed on it.
No opinion given in this material constitutes a recommendation by City Index or the author that any particular investment, security, transaction or investment strategy is suitable for any specific person. The material has not been prepared in accordance with legal requirements designed to promote the independence of investment research. Although City Index is not specifically prevented from dealing before providing this material, City Index does not seek to take advantage of the material prior to its dissemination. This material is not intended for distribution to, or use by, any person in any country or jurisdiction where such distribution or use would be contrary to local law or regulation.