RBA Interest Rate Decision in 12 Hours; AUD/USD Forecasts

In the second half of the trading day, all the eyes will be on the Reserve Bank of Australia policy meeting. The central bank will release its interest rate decision at 03:30 GMT on Tuesday, accompanied by a rate statement, however, there is no press conference following. RBA is anticipated to keep its cash rate at a record low of 1.5%, where it has been since August, however, the policymakers are likely to hinge some hawkishness for the next policy meetings in the year. The meeting minutes will be published on Thursday overnight.


Since the last meeting in December, the economy seems to have left behind the possibilities of recession after a contraction experienced in Q3 of 2016. The economy unexpectedly shrank by 0.5% for the first time in 5,5 years. The forecasts expect Australian economy to have expanded by 0.5% the last quarter of the year (scheduled for release on March 1st). Inflation rate picked up to 1.5% year-over-year in Q4. Even though it’s far below RBA’s 2% - 3% target range, it’s on the right way to reach it. It’s known that Australian economy is heavily based on commodities which their prices are picking up over the last month. The labour market is stable and in a strong situation, while their currency is favoured from the weak U.S. dollar due to Trump’s presidency uncertainty.

Thus, we would expect RBA members to take into account the above improvements and keep the door open for rate hikes in the near future. Positive comments from the central bank may be the push Aussie needs to break the 0.7700 strong psychological barrier after two failed attempts the last five days.

AUD/USD – Technical Outlook
The AUD/USD pair recorded gains the week before the RBA interest rate decision tonight and, overall, it added more than 5.5% year-to-date from its upward rally. During Thursday, Aussie printed a new 13-week high five pips below the 0.7700 strong psychological level, following its uptrend started back in end-December. After the aggressive rally to the upside, a correction may follow until the 0.7605 support barrier and then we will likely see another test of its previous high.

On the other hand, a break above the 0.7695 obstacle will open the door for 0.7740. On the daily chart, the RSI indicator rebounded on the overbought area and now is moving lower whilst the MACD oscillator still has its bullish momentum as it crossed its trigger line to the upside. In addition, the moving averages are sloping to the upside endorsing the bullish attitude on price.


JFD Research