RBA will announce its interest rate decision during tomorrow’s Asian session (04:30 GMT) and is expected to remain on hold at +1.50%. Currently, AUD OIS imply a probability for the bank to remain on hold of 99.67%. As the interest rate is expected to remain on hold, the market focus could turn to the accompanying statement. Comments could be raised about the inflation rate, as it accelerated to +2.1% YoY for Q2 of 2018, and broke the lower threshold of RBA’s inflation target range of +2.00% YoY to +3.00% YoY. With an accelerating inflation rate as well as the retail sales growth rate and at the same time a rather low unemployment, the accompanying statement could have a more hawkish tone and support AUD, while on the other hand international trade tensions could increase uncertainty somewhat.
AUD/USD continued its sideways movement on Friday, touching the 0.7410 (R1) resistance line. We could see the pair continue its sideways movement with some bullish tendencies as the market may position itself ahead of RBA’s interest rate decision. Should the pair come under buying interest we could see it breaking the 0.7410 (R1) resistance level and aim for the 0.7440 (R2) resistance area. On the other hand, should the pair come under selling interest we could see it breaking the 0.7370 (S1) support line and aim for the 0.7345 (S2) support area.
- Support: 0.7370(S1), 0.7345(S2), 0.7310(S3)
- Resistance: 0.7410(R1), 0.7440(R2), 0.7465(R3)
Chances for “No Brexit deal” rising
Chances for a no Brexit deal are rising as UK officials are making similar statements. On Friday, BoE Governor Mark Carney stated to the BBC that a chance for a no-deal Brexit is “uncomfortably high”. While on Sunday, UK International Trade Secretary Liam Fox predicted a messy Brexit with a chance of 60% for a no-deal Brexit. Also, Brexit Secretary Raab stated to a French media that he sees no alternative to finding a deal. Analysts, see the case for the UK negotiating strategy to include an underscoring of a no deal Brexit before the negotiations, in order to add pressure to the EU. Should there be further negative headlines about Brexit, we could see the pound weakening.
GBP/USD traded in a sideways manner on Friday, testing the 1.3035 (R1) resistance line. We could see the pair trading in a sideways manner however bearish tendencies could occur as the pair might prove to be sensitive to any Brexit news. Technically we would like to point out that the RSI indicator in the 4-hour chart, is constantly near the reading of 30, implying an overcrowded short position. Should the bulls take over the pair’s direction we could see the pair breaking the 1.3035 (R1) resistance line, while should the bears take over, we could see the pair breaking the 1.2960 (S1) support line and aim for the 1.2905 (S2) support barrier.
- Support: 1.2960(S1), 1.2905(S2), 1.2850(S3)
- Resistance: 1.3035(R1), 1.3090(R2), 1.3160(R3)
In today’s other economic highlights:
In the European session, we get Germany’s Industrial orders growth rate for June as well as UK’s Halifax House prices for July.
As for the rest of the week:
On Wednesday, China’s Trade Balance figure for July is due out, while on Thursday, during the Asian session RBNZ’s interest rate decision will be announced. On a busy Friday, we get Japan’s and UK’s GDP growth rate for Q2, Canada’s employment data for July and the US inflation rates for July. Please be advised that for any updates regarding the oil market you can refer to out Oil weekly outlook due out, later today.
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