RBA expected to cut rates yet will it signal that more cuts are in the pipeline?

We start the week with Trump’s trade wars tantalizing the market as the US tariff deadline for China is tomorrow. It should be noted that, besides India, the US President last week had also warned China about buying Russian oil. Furthermore, it was announced that NVIDIA and AMD agreed to pay 15% of their China chip sales to the US. Overall, we still see the issue as being widely uncertain despite some progress being reported in the US-Sino trade negotiations and a possible failure to reach a trade deal could create wide uncertainty in the markets, weighing on riskier assets while providing inflows for safe havens. On the flip side a possible deal could make the market sentiment more risk-oriented, which could provide support for US equities and weigh on gold’s price.

Gold’s price edged lower in today’s Asian session, breaking the 3285 (R1) support line now turned to resistance. The RSI indicator corrected lower nearing the reading of 50, implying an easing of the bullish sentiment of the market for the pair. Hence, despite recognising some slight bullish tendencies we maintain a bias for a sideways motion of the precious metal’s price. Should the bulls take over, we may see gold’s price breaking the 3285 (R1) resistance line clearly and taking aim of the 3500 (R2) resistance level, marking an All Time High level for the precious metal’s price. Should the bears take over, we may see gold’s price diving to break the 3245 (S1) support line thus paving the way for the 3120 (S2) support level.

In tomorrow’s Asian session, we expect Aussie traders to focus on the release of RBA’s interest rate decision on Tuesday. Currently, market expectations are for the bank to cut rates and AUD OIS imply a probability of 98.7% for such a scenario to materialise. Yet, AUD OIS also suggest that the market expects the bank to proceed with two more rate cuts until the end of the year, once in November and once in December, hence the market expectations for the bank are clearly dovish. Should the bank cut rates as expected, and in its forward guidance signal that there are more rate cuts down the line, we may see the AUD slipping. On the flip side, should the bank signal hesitation for further easing of its monetary policy, thus contradicting the market’s dovish expectations, we may see the Aussie getting substantial support.

AUD/USD tended to stabilise on Friday and during today’s Asian session, between the 6620 (R1) resistance line and the 0.6375 (S1) support level. We tend to maintain our bias for the pair’s sideways motion to continue and supporting our case is the RSI indicator, which is running along the reading of 50, implying a relative indecisiveness on behalf of market participants for the pair. Yet RBA’s interest rate decision could alter the pair’s direction. Should the bulls be in the lead, we may see AUD/USD breaking the 0.6620 (R1) resistance line, and starting to aim the 0.6940 (R2) resistance level. Should the bears take over, we may see AUD/USD breaking the 0.6375 (S1) support line and start aiming for the 0.6940 (R2) resistance level.

Other highlights for the day:

Today we get Norway’s CPI rates for July and GDP rates for Q2. In tomorrow’s Asian session, besides RBA’s interest rate decision we get Australia’s NAB business conditions and business confidence indicators for July.

As for the rest of the week:

On Tuesday, we get Germany’s ZEW indicators for August, Canada’s building permits for June and the US CPI rates for July. On Wednesday, we get Japan’s PPI rates for July and on Thursday we get Australia’s employment data for the same month, UK’s GDP rates for Q2, Sweden’s CPI rates for July, Norway’s Norgesbank interest rate decision, Euro Zone’s revised GDP rate for Q2 and industrial output for June, the weekly US initial jobless claims figure and the US PPI rates for July. On Friday, we get Japan’s GDP rate for Q2, Chinese data for July, the US retail sales also for July and the US industrial production for July.

XAU/USD Daily Chart

• Support: 3245 (S1), 3120 (S2), 2955 (S3)
• Resistance: 3285 (R1), 3500 (R2), 3650 (R3)

AUD/USD Cash Daily Chart

• Support: 0.6375 (S1), 0.6130 (S2), 0.5910 (S3)
• Resistance: 0.6620 (R1), 0.6940 (R2), 0.7160 (R3)

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