RBA expected to remain on hold

FX markets remain quite choppy with mixed economic data across the board. Apart from Australia, activity is pretty limited in Asia, with Japan closed for a bank holiday.

The main focus in today’s Asian trade will be on the AUD heading into the RBA’s interest rate decision. Prior to the RBA decision we have March trade balance figures where a billion dollar surplus is expected. The RBA is expected to keep rates on hold with its neutral stance being maintained. A couple of issues to look out for will be language around the fairly elevated AUD and the recent benign inflation reading.

The global backdrop also remains a concern, particularly with China continuing to churn out some mixed economic readings. Ukraine and Russia concerns just add to the already volatile pot and keep a lid on the AUD’s upside in the near term.

AUD/USD uptrend under threat

Price action wise, AUD/USD has been in a tight range all week with gains capped at 0.93 and a floor in the 0.925 region. There is also an uptrend support line which comes in at around 0.928 on the daily chart and we really need to see the pair close above this level to keep it in its short-term uptrend, failure of which could see the pair head back to test the 0.92 region. Our clients are also indecisive heading into the decision, with 55% of all open positions on AUD/USD being shorts.

It is difficult to see too much upside in the pair on the RBA’s statement given the fundamentals that the domestic economy is facing at the moment. I would be more inclined to short on any strength or take advantage of any downside momentum to short the pair.

IG Charts

IGA, may distribute information/research produced by its respective foreign marketing partners within the IG Group of companies pursuant to an arrangement under Regulation 32C of the Financial Advisers Regulations. Where the research is distributed in Singapore to a person who is not an Accredited Investor, Expert Investor or an Institutional Investor, IGA accepts legal responsibility for the contents of the report to such persons only to the extent required by law. Singapore recipients should contact IGA at 6390 5118 for matters arising from, or in connection with the information distributed.

This information/research prepared by IGA or IGA Group is intended for general circulation. It does not take into account the specific investment objectives, financial situation or particular needs of any particular person. You should take into account your specific investment objectives, financial situation or particular needs before making a commitment to trade, including seeking advice from an independent financial adviser regarding the suitability of the investment, under a separate engagement, as you deem fit. No representation or warranty is given as to the accuracy or completeness of this information. Consequently any person acting on it does so entirely at their own risk. In addition to the disclaimer above, the information does not contain a record of our trading prices, or an offer of, or solicitation for, a transaction in any financial instrument. Any views and opinions expressed may be changed without an update.

See important Research Disclaimer.