AUD/USD, ASX 200 tread water ahead of expected RBA hike: Asian Open

Market Summary:

The RBA are widely expected to hike their cash rate by 25bp today, and quite rightly so. The current rate of 4.1% remains relatively low compared with their peers, and with inflation not softening quickly enough it leaves little choice but for the RBA to hike to 4.35% and retain a hawkish tone. If they don’t, the RBA risks losing credibility very early under Michelle Bullocks tenure. At the very least, the statement needs to include the classic signoff “Some further tightening of monetary policy may be required”. So, it really comes down to how hawkish the markets perceive the statement and how many more hike/s they believe will follow, as to how markets will react.

Australia’s PM Albanese has become the first to meet with China’s Xi Jinping in over seven years, after their meeting in Beijing on Monday
Rising US bond yields saw the US dollar recoup some of Friday’s losses and its FX major peers retrace, although volatility remained low overall
It was a very quiet session on Wall Street with US indices trading in tight ranges around last week’s highs
Gold formed a bearish engulfing day following Friday’s shooting bar (which itself was a lower high and false break of $2000). The path of least resistance appears lower for a potential move to 1950 - 1960 from a technical perspective
WTI crude oil continues to meander around its 200-day EMA yet hold above $80, a clear level of support for oil bulls to defend over the near-term

Events in focus (AEDT):

10:30 – Japan’s average cash earnings, China trade balance
14:30 – RBA cash rate decision, statement
16:00 – German industrial production
19:35 – Eurozone PPI

ASX 200 at a glance:

The ASX 200 has produced a strong rally into the 7,000 handle leading into today’s RBA meeting
The 50-day EMA is also capping as resistance which makes the 7,000 area the more pivotal
Failure for the RBA to deliver a hawkish tone alongside a hike risks sending the ASX 200 higher and brings the 7100 resistance zone into focus
A hawkish tone could mark a swing high and see the ASX 200 move towards 6900 (the more hawkish the tone, the deeper the move lower could be)

AUD/USD technical analysis (4-hour chart):

As AUD/USD has already posted strong gains heading into today’s meeting, is begs the question as to whether the anticipated 25bp hike has already been priced in. And that risks a move lower on AUD/USD if the RBA simply deliver the expected hike and stop short of including a hawkish bias (threat of further hikes).

Monday’s high met resistance around the September highs (and double top) and the monthly R2 pivot point, making it an important level of resistance for bulls to conquer. Prices are pulling back, and they might continue to do so heading into the meeting as prices try to fill the ‘liquidity gap’ left during its strong rally.

If the RBA fumble the meeting, a move to 0.6430 seems plausible given the high-volume node (which can act as a magnet for prices) which sits near the monthly R1 pivot. A break beneath it brings 0.6400 into focus.

A hike could send AUD/USD back to the cycle highs, but a sustainable break above it may require a hawkish hike.

View the full economic calendar

-- Written by Matt Simpson

Follow Matt on Twitter @cLeverEdge

How to trade with City Index

You can trade with City Index by following these four easy steps:

Open an account, or log in if you’re already a customer

• Open an account in the UK
• Open an account in Australia
• Open an account in Singapore
Search for the market you want to trade in our award-winning platform
Choose your position and size, and your stop and limit levels
Place the trade

This report is intended for general circulation only. It should not be construed as a recommendation, or an offer (or solicitation of an offer) to buy or sell any financial products. The information provided does not take into account your specific investment objectives, financial situation or particular needs. Before you act on any recommendation that may be contained in this report, independent advice ought to be sought from a financial adviser regarding the suitability of the investment product, taking into account your specific investment objectives, financial situation or particular needs.

StoneX Financial Pte. Ltd., may distribute reports produced by its respective foreign entities or affiliates within the StoneX group of companies or third parties pursuant to an arrangement under Regulation 32C of the Financial Advisers Regulations. Where the report is distributed to a person in Singapore who is not an accredited investor, expert investor or an institutional investor (as defined in the Securities Futures Act), StoneX Financial Pte. Ltd. accepts legal responsibility to such persons for the contents of the report only to the extent required by law. Singapore recipients should contact StoneX Financial Pte. Ltd. at 6826 9988 for matters arising from, or in connection with the report.

In the case of all other recipients of this report, to the extent permitted by applicable laws and regulations neither StoneX Financial Pte. Ltd. nor its associated companies will be responsible or liable for any loss or damage incurred arising out of, or in connection with, any use of the information contained in this report and all such liability is hereby expressly disclaimed. No representation or warranty is made, express or implied, that the content of this report is complete or accurate.

StoneX Financial Pte. Ltd. is not under any obligation to update this report.

Trading CFDs and FX on margin carries a high level of risk that may not be suitable for some investors. Consider your investment objectives, level of experience, financial resources, risk appetite and other relevant circumstances carefully. The possibility exists that you could lose some or all of your investments, including your initial deposits. If in doubt, please seek independent expert advice. Visit www.cityindex.com/en-sg/terms-and-policies for the complete Risk Disclosure Statement.

ALL TRADING INVOLVES RISKS. LOSSES CAN EXCEED DEPOSITS.

City Index is a trading name of StoneX Financial Pte. Ltd. (“SFP”) for the offering of dealing services in Contracts for Differences (“CFD”). SFP holds a Capital Markets Services Licence issued by the Monetary Authority of Singapore for Dealing in Exchange-Traded Derivatives Contracts, Over-the-Counter Derivatives Contracts, and Spot Foreign Exchange Contracts for the Purposes of Leveraged Foreign Exchange Trading. SFP is also both Derivatives Trading and Clearing member of the Singapore Exchange (“SGX”). SFP is a wholly-owned subsidiary of StoneX Group Inc.

The information provided herein 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 invest, 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.

The information does not represent an offer of, or solicitation for, a transaction in any investment product. Any views and opinions expressed may be changed without an update. To understand the risks and costs involved, please visit the section captioned “Important Information” and the “Risk Disclosure Statement”.

The information herein is not directed to, or intended for distribution to or use by, any person or entity who is a citizen or resident of or located in any locality, state, country or other jurisdiction where such distribution, publication, availability or use would be contrary to law or regulation.

StoneX Financial Pte. Ltd. 1 Raffles Place, #18-61, One Raffles Place Tower 2, Singapore 048616. Tel: 6309 1000. Co. Reg. No.: 201130598R.

This advertisement has not been reviewed by the Monetary Authority of Singapore.