2019-11-11 • Updated
On September 4 (7:30 MT time), the Reserve Bank of Australia will release the interest rate. The market doesn’t anticipate any changes in the interest rate, however, the speech of the central bank will move the market a lot. Let’s have a look at the current economic situation to forecast how the central bank will behave.
The environment of trade wars and not very strong economy don’t let the central bank raise the interest rate yet. The RBA is sure that the weak AUD helps the economy to develop.
Previously, the market anticipated the rate hike in 2019 but recent news pulled expectations down. Westpac Banking Corp. raised the mortgage rate last week. Suncorp and Adelaide bank have raised borrowing costs as well. The market is waiting whether three other big banks will follow. And the possibility is high.
The last house prices data kept falling for the eleventh straight month. The action of the banks will definitely affect the already falling house prices in Sydney and Melbourne. Moreover, the further decline is anticipated as the peak selling season starts.
The possibility of the economic data’s worsening made traders think that the Reserve bank may prolong the period of the stable rate to 2020. In times of the global rate hike, the stable Australian interest rate will affect the AUD even more.
So what can we expect from the RBA meeting on September 4? Risks that the RBA sounds dovish are increasing significantly. If the Reserve bank sounds cautious taking into consideration falling house prices and escalating trade wars tensions, the AUD will fall. However, some experts still hope that recent news won’t affect the central bank’s view and it may stand for the rate hike in 2019. If the RBA sounds hawkish still singling the rate hike in 2019, the Australian dollar will rise.
What about real levels?
Up to now, AUD/USD has been trying to recover. If the RBA is hawkish, AUD/USD will break above the pivot point at 0.7242. The next resistance is at 0.73. If the central bank is not encouraging, the pair will go to the support at 0.7121. In case of the fall, risks of the further plunge will strongly increase. The next support is at 0.7055. Moreover, the 50-week MA is near to cross 100-day MA upside down, that is a negative signal for the weekly move.
Making a conclusion, we can say that there are high risks that the RBA will be neutral/dovish this time as the economic data put pressure on the RBA decision. In this case, the AUD will fall. Otherwise, if the RBA doesn’t consider the rise of the mortgage rate as negative, and keeps signaling the rate hike in 2019, the AUD will be able to appreciate.
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Hello again my friends, it’s time for another episode of “What to Trade,” this time, for the month of April. As usual, I present to you some of my most anticipated trade ideas for the month of April, according to my technical analysis style. I therefore encourage you to do your due diligence, as always, and manage your risks appropriately.
Bearish scenario: Sell below 1.0820 / 1.0841... Bullish scenario: Buy above 1.0827...
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