AUD/USD lower as the RBA enters perpetual-hold mode

Notes from the RBA’s March statement

The RBA held interest rates at 4.35%
Inflation continues to moderate but remains high
Services inflation remains elevated, and is moderating at a more gradual pace
Conditions in the labour market continue to ease gradually
Wages picked up in December but appear to have peaked
CPI weighing on real wage, household consumption is weak
The economic outlook remains uncertain
Domestically, uncertainties remain regarding policy lags and how firms’ pricing decisions and wages will respond to the slower growth while the labour market remains tight
While recent data indicate that inflation is easing, it remains high
It will be some time yet before inflation is sustainably in the target range (no case for an easing bias)
The Board is not ruling anything in or out (rates could move in either direction)

The RBA finally ditched their slightly hawkish bias that nobody thought they needed. And that puts them into perpetual-hold move until we either see the wheels fall off of the Australian or global economy, or dare I say, rising commodity prices spook central banks into reverting to a hawkish mode.

Ultimately, the RBA retain a lower cash rate then the majority of their peers. And whilst they acknowledge that the economy is slowing, they will not see a case to cut in all the time they describe inflation as “too high”. But if or when they do eventually remove any reference to CPI being “too high”, it is game on for a cut. I just do not see that happening in the foreseeably future.

CI Central Banks

AUD/USD technical analysis:

The Australian dollar currently traders lower for a fourth day, and has broken convincingly beneath its 200-day average. The day’s current low has almost perfectly respected the lower 1-day implied volatility band outlined this morning. Yet it seems like AUD/USD wants to continue moving lower. And with the chance of a less-dovish (or more-hawkish) than expected FOMC meeting, I have 65c on the cards for a potential downside target.

And as we saw a 3-wave move between the Fed low to March high, we should also prepare for the potential that AUD/USD may break to fresh cycle lows for the year.

AUD/NZD technical analysis:

The cross has enjoyed a very strong rally form the February low, although it now appears to have entered a corrective mode. A bearish inside day formed on Monday and met resistance at the 200-day average, and at current prices today’s candle is on track for a bearish outside day / shooting star.

Bears could enter short with a stop above this week’s high and target the bullish engulfing low, or for a large move the 1.07 handle near the 38.2% Fibonacci level.

-- 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.