RBA Unmoved:
Yesterday’s Reserve Bank meeting, while largely uneventful in terms of systematic changes in policy or direction, did have quite the effect on price with the Aussie Dollar putting in a solid 100 pip gain for the day.
The RBA held off the slight temptation that it surely had to cut rates again, leaving the cash rate on hold at 2.00% and not giving the markets much fat to chew on in terms of guidance either.
“Monetary Policy needs to be accommodative.”
“Sees inflation consistent with target in the next 1 to 2 years.”
“Australian Dollar is adjusting to significant declines in commodity prices.”
“Economic and financial conditions to inform policy stance.”
Pretty stock standard lines as you can see, showing that when trading around news, the most important factor that you have to consider is ‘in which direction is the bigger risk?’ In this case, with an on hold decision all but priced in above 80% heading into the release, it was most definitely to the upside if Stevens didn’t release the doves.
This scenario saw AUD/USD rally as the heavily priced in, overly dovish tone never eventuated. Combine this sort of thinking with the technicals below and it all just adds to your conviction when entering trades.
AUD/USD Daily:
In yesterday’s RBA Preview, we spoke about the weekly zone that AUD/USD was currently sitting in as the key and the Aussie ripped higher to re-test the underside of the major weekly trend line just about to the pip.
Did you manage to catch any of the move?
US Trade Balance Blows:
The other major piece of news overnight was the trade balance blow-out in the US from $41.8 billion to $48.3 billion. US exports took the biggest hit from the economic uncertainty engulfing the world economy, while surprisingly it was imports from China that surged.
This only illustrates the US economy is vulnerable to a strong dollar with already weak global demand lessened again by their lack of purchasing power. This will surely have an impact on Q3 GDP forecasts and a flow on effect of another reason to delay hiking interest rates by the Fed.
Take a look at any a chart of any of the majors and you can see the effect this is having on the Dollar already. The tide is starting to change!
On the Calendar Wednesday:
The big event on the calendar is the tentative release of the Bank of Japan Monetary Policy Statement and subsequent Press Conference.
The BoJ is expected to hold off on expanding its stimulus program amid a stuttering domestic and world economic scene.
USD/JPY 4 Hourly:
We’ve been following this USD/JPY trend line or range top resistance, depending on how you look at it, for a while now. Today could be the catalyst for price to finally give us some direction to trade the pair!
CNY Bank Holiday
JPY Monetary Policy Statement
JPY BOJ Press Conference
GBP Manufacturing Production m/m
CAD Building Permits m/m
Chart of the Day:
The major daily bearish trend line on oil has given us plenty to talk about recently, with price again testing the level overnight before breaking out to the upside.
Oil Daily:
US Crude Oil Traded at its highest price in over 3 months after reports of tighter supply for 2016 and of course a broad weakening in the USD.
With price largely range-bound for a couple of months now, if price can manage to make new highs and kick away then this could be a nice trade for the breakout traders.