The battle lines of the RBA decision are clear:
- No economists are expecting moves on the 2.50% rate
- The RBA is expected to warn about inflation after surprisingly high CPI numbers
Fear of a more-hawkish RBA has halted the decline of AUD/USD and carved out a 0.8650-0.8850 range.
Given the deterioration in sentiment and last week’s decision by the RBNZ to hold off on hikes, the risk is that the RBA looks past the inflation data and frets about slow growth.
Looking at the techsi, the big development in January was the fall below the 100-month moving average for the first time since 2009.
AUDUSD 100 month moving average
There is very little support on that chart.
On the daily chart, AUDUSD briefly touched the highest since Jan 23 in early US trading but has given back all its gains. I don`t take that as a particularly negative sign given the risk-off environment and RBA uncertainty.
My take is the same as it is for all markets at the moment: Go where the headlines take you. If the RBA is dovish and AUDUSD breaks the Jan lows, sell. If they`re worried about inflation, buy on a short squeeze or look to sell at higher levels.
