Originally published by AxiTrader
Quick Recap
RBA governor Stevens presides over his last meeting as governor today. That means there is no expectation that he will make any material changes to the outlook for rates or the economy. But the fact high-frequency coincident data in Australia looks like it's slipping means the statement release at 2.30pm may not be a non-event.
Aussie traders will be watching closely given the failure above 76 cents for the past two night's trading.
What You Need To Know
It's a fair bet that the Reserve Bank's decision to cut its official cash rate by 25 points to 1.5% at the August meeting was in part a deck-clearing exercise to usher in a smooth transition as governor for Phil Lowe after Glenn Stevens presides over his last board meeting today.
That means that 26 of the 26 economists surveyed by Bloomberg are not expecting any change from current cash rate at today's meeting.
But even though the only chance of a move is the fact we "never say never" that does not mean nothing can happen.
One thing that I've noticed and started talking about on my daily videos is that high frequency coincident economic data in Australia has started to print on the weaker side. That prompted my colleague Paul Colgan at Business Insider to write yesterday that warning signs are flashing for the Australian economy.
Paul wrote:
There have been some nasty surprises in some key economic data points over recent weeks. Today a monthly survey from the Ai Group which tends to be a reasonable leading indicator on consumer spendingshowed a sharp and sudden reversal in activity levels.
This followed a similar result in Ai Group’s monthly survey on the manufacturing sector, and a flat reading in the Australian Bureau of Statistics data on retail sales for July.
The ANZ-Roy Morgan consumer confidence survey also noted a very sharp downturn in people’s views on the long-term economic outlook.
In a period when household consumption is central to driving economic activity, it helps for consumers to be relatively upbeat, and you don’t want retail sales standing still.
That's exactly right.
So even though the forecasts for tommorow's release of Q2 Australian GDP have been upgraded to 0.5% and 3.2%-3.3% year on year the signs are the economy might be slowing sharply.
That's something the RBA won't have failed to pick up through its own liaison. But as Colgan said the questions is whether it's just a swallow, not summer, and whether the RBA feels the need to comment on the emergent weakness.
Interest rate and Aussie dollar traders will also be watching closely for what the RBA says about the currency itself, housing, Chinese growth and employment.
There may be no move expected but words - especially those from central bankers - still have power in Australian markets so we'll all be watching closely at 2.30pm AEST today.
What The Charts Say for AUD/USD
As I highlighted yesterday "my raw reading of the weekly chart above is that the Aussie dollar has further to fall - toward 0.7400/35".
Looking at the daily my view hasn't changed materially either.
Yesterday I noted that "the daily chart suggests an overall downtrend but that the AUDUSD is currently mid range. That suggests any rallies toward 0.7615/35 will find selling with 0.7680/90 sellers lurking as well. The daily target accords with the weekly target".
We saw a failure of the Aussie again overnight with a high in the 0.7605/10 region. It's at 0.7588 today and I get a sense the buyers want to take it higher. It's clinging to a little 4 hour trend line as you can see in the chart below.
Levels to watch are 0.7560 and 0.7615/20.
Have a great day's trading
Greg McKenna
Chief Market Strategist AxiTrader