Hawkish RBA Bets Boosting Aussie
RBA to Hike Next Week?
The Aussie has been one of the bets performers in the FX space this week, bolstered by a fresh spike in oil prices, given the country’s energy position. Looking ahead, hawkish expectations into next week’s RBA meeting should keep the currency underpinned while any resilience in global asset prices will also be welcomed. Market pricing for a hike from the RBA next week is currently around the 70% level. As such, there is plenty of room for AUD to push higher if that pricing lifts closer to the meeting. Alternatively, if pricing remains around that level, there should be plenty of money joining the market on the back of a hike as the outlook for the RBA turns more hawkish amidst the upsurge in global energy prices. The caveat to this is that aggressive bullish positioning into the meeting could easily fuel a sell-the-news situation particularly f the RBA doesn’t strike a firmly hawkish tone in its outlook, signalling furtehr tightening to come.
Risk Flows
For now, the key driver remains the war in the Middle East and expectations around how that will continue to drive markets. With energy prices vulnerable to continued upside, and Iran warning of $200 p/b, AUD stands to push higher. However, if global risk markets start to tumble, perhaps in response to the growing view that the conflict will not be resolved any time soon, AUD could come undone, particularly if USD starts t push higher again.
Technical Views
AUDUSD
For now, the pair remains capped by the bull channel highs and .7153-level resistance. We’re also seeing strong bearish divergence in momentum studies readings. If we correct lower form here, the big focus will be on support at the .6942 level which bulls need to defend to maintain the near-term bullish outlook towards .7285 next. If we break lower, .6802 and the bull channel lows will be next on watch.
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With 10 years of experience as a private trader and professional market analyst under his belt, James has carved out an impressive industry reputation. Able to both dissect and explain the key fundamental developments in the market, he communicates their importance and relevance in a succinct and straight forward manner.