RBA’s interest rate decision in focus

In the land of the down under, we highlight  RBA’s interest rate decision which is to be released during tomorrow’s Asian session. The majority of market participants are currently anticipating the bank to remain on hold, with AUD OIS currently implying a 97.4% probability for such a scenario to occur. It should be noted that the market also expects the bank to marginally remain on hold throughout the year, maybe proceed with a rate cut in December. Hence our attention turns to the bank’s accompanying statement, where should RBA policymakers imply that the bank may cut interest rates this year, it could weigh on the Aussie. On the flip side, should it be implied that the bank may keep interest rates high for a greater period of time, it could instead provide support for the Aussie. On a fundamental level, one could argue that the slight tightening of Australia’s employment market as implies by May’s data and the fact that in April the CPI rates were still above the bank’s target range could allow the bank to remain confidently hawkish, yet economic activity is easing and may add pressure on RBA to ease its hawkishness. 

AUD/USD seems to be edging lower briefly breaking the 0.6595 (R1) support line for now turned to resistance. Overall though the sideways motion of the pair seems to be continued and we also note that the RSI indicator seems to have breached below the reading of 50, yet remains close thus implying that the market seems to remain rather indecisive about the direction of the pair’s next leg. For a bearish outlook, we would require the pair’s price action to place more distance between itself and the 0.6595 (R1) resistance line in order to break the level clearly and start aiming if not breaching the 0.6445 (S1) support base. On the flip side, for a bullish outlook the bar seems to be high as we would require the pair to break above the 0.6595 (R1) and continue to break also the 0.6715 (R2) resistance level and thus pave the way for the 0.6870 (R3) resistance barrier.

Other highlights for the day:

Today we note of Canada’s House Starts for May and New York’s Fed Manufacturing for June while on the monetary front, we note that ECB’s Chief Economist Lane and Vice President De Guindos as well as Philadelphia Fed President Harker are scheduled to speak.

USD/CAD remained in a sideways motion just below the 1.3755 (R1) resistance line. We tend to maintain a bias for the sideways motion to continue given also that the RSI indicator continues to run along the reading of 50, implying a rather indecisive market for the pair’s direction. At the same time, we also note some bullish tendencies, as the 20, 100 and 200 moving averages have an upward inclination implying the presence of a residue of bullishness among market participants. Yet for a bullish outlook, we would require the pair to clearly break the 1.3755 (R1) resistance ceiling and aim if not breach the 1.3895 (R2) resistance level. Should the bears take over, we may see the pair breaking the 1.3610 (S1) support line clearly and take aim clearly the 1.3460 (S2) support level.   

As for the rest of the week:

On Tuesday we get Germany’s ZEW economic sentiment figure for June, followed by the US retail sales rate for May and US industrial production rate for May as well. On  Wednesday we get Japan’s trade balance figure and the UK’s CPI rate both for May. On Thursday we get New Zealand’s GDP rate for Q1, the US weekly initial jobless claims figure, US Philly Fed business index figure for June and the Eurozone’s preliminary consumer confidence figure for June as well. On Thursday’s European session on the monetary front we note the interest rate decisions of Norgesbank, SNB and BoE. On Friday, we get the preliminary PMI figures for June of Australia, Japan, the UK the Eurozone and the US as well as UK’s retail sales rate for May, followed by Canada’s retail sales rate for April.

AUD/USD Daily Chart

Support: 0.6445 (S1), 0.6285 (S2), 0.6170 (S3)

Resistance: 0.6595 (R1), 0.6715 (R2), 0.6870 (R3)

USD/CAD Daily Chart

Support: 1.3610 (S1), 1.3460 (S2), 1.335 (S3)

Resistance: 1.3755 (R1), 1.3895 (R2), 1.4050 (R3)

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