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Aussie Steady after RBA Hike, Dollar Sluggish

Dollar tried to rebound overnight, as risk-on sentiment receded after solid services data. But there is no follow through buying in Asian session with generally mixed mood. Aussie is under mild selling pressure and there is no support from RBA’s expected 25bps rate hike. For now, Dollar and Euro are on the stronger side for the week, while Yen and Aussie are on the weaker side. Investor might refrain from making larger bets until next week’s FOMC meeting.

Technically, USD/CAD’s strong rebound suggests that choppy rise from 1.3224 isn’t finished yet. The development suggests that Dollar’s near term weakness is not 100% one-sided. Indeed, a break above 1.3644 would firstly resume the mentioned rise. More importantly, that could be a sign of a more sustainable rebound in the greenback elsewhere.

In Asia, at the time of writing, Nikkei is up 0.29%. Hong Kong HSI is down -1.09%. China Shanghai SSE is down -0.08%. Singapore Strait Times is down -0.38%. Japan 10-year JGB yield is up 0.0003 at 0.258. Overnight, DOW dropped -1.40%. S&P 500 dropped -1.79%. NASDAQ dropped -1.93%. 10-year yield rose 0.093 to 3.599.

RBA hikes 25bps, expects to increase interest rates further

RBA raises cash rate by 25bps to 3.10% as widely expected. Tightening bias is maintained as “the Board expects to increase interest rates further over the period ahead”, even though it’s “not on a pre-set course”. The size and timing of future rate hikes will continue to be determined by incoming data and the outlook for inflation and job market. The path to slow inflation and achieve a soft landing remains a “narrow one”.

The central bank expects inflation to peak at around 8% in Q4, and then decline next year due to “ongoing resolution of global supply-side problems, recent declines in some commodity prices and slower growth in demand”. Medium-term inflation expectations “remain well anchored”. Inflation is expected to decline to “a little over 3 per cent over 2024”.

RBA also expects growth to “moderate over the year ahead” to 1.50% in 2023 and 2024. Labor market remains “very tight” but employment growth has slowed. Wages growth is “continuing to pick up”. “Given the importance of avoiding a prices-wages spiral, the Board will continue to pay close attention to both the evolution of labour costs and the price-setting behaviour of firms in the period ahead.”

BoJ Kuroda: Premature to discuss specifics of monetary policy framework

BoJ Governor Haruhiko Kuroda told the parliament, “the BOJ is seeking to sustainably and stably achieve its 2% inflation target accompanied by wage growth. Our view is that this will likely take more time.”

“It’s therefore premature to discuss specifics about our monetary policy framework,” he said.

“We’ll maintain our current monetary policy to make it easier for companies to raise wages,” he added.

Looking ahead

Germany factory orders and UK PMI construction will be released in European session. Later in the day, US and Canada will release trade balance.

AUD/USD Daily Report

Daily Pivots: (S1) 0.6640; (P) 0.6746; (R1) 0.6804; More…

Intraday bias in AUD/USD is turned neutral again with current retreat. Considering bearish divergence condition in 4 hour MACD, break of 0.6641 support should indicate short term topping, following rejection by 0.6871 fibonacci level. Intraday bias will be back on the downside for 0.6521 resistance turned support first.

In the bigger picture, a medium term bottom is in place at 0.6160 already. But it’s too early to call for trend reversal. Nevertheless, even as a corrective move, rise from 0.6169 should target 38.2% retracement of 0.8006 to 0.6169 at 0.6871. Sustained trading above 55 week EMA (now at 0.6922) will raise the chance of the start of a bullish up trend. However, rejection by 0.6781 or 55 week EMA, followed by 0.6521 resistance turned support and retain medium term bearishness.

Economic Indicators Update

GMT Ccy Events Actual Forecast Previous Revised
23:30 JPY Labor Cash Earnings Y/Y Oct 1.80% 2.00% 2.10% 2.20%
23:30 JPY Household Spending Y/Y Oct 1.20% 0.90% 2.30%
00:01 GBP BRC Like-For-Like Retail Sales Y/Y Nov 4.10% 1.20%
00:30 AUD Current Account Balance (AUD) Q3 -2.3B 6.3B 18.3B 14.7B
03:30 AUD RBA Interest Rate Decision 3.10% 3.10% 2.85%
07:00 EUR Germany Factory Orders M/M Oct 0.20% -4.00%
09:30 GBP Construction PMI Nov 52.7 53.2
13:30 CAD Trade Balance (CAD) Oct 0.9B 1.1B
13:30 USD Trade Balance (USD) Oct -79.4B -73.3B

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