A surprisingly less dovish RBA boosted the Aussie earlier today. Can the bulls maintain their momentum in the next trading sessions?
Fresh Market Headlines & Economic Data:
- US vows 100% tariffs on French Champagne, cheese, handbags over digital tax
- Trump: Fed has “called interest rates and quantitative tightening wrong from the first days of Jay Powell”
- Trump: Fed should lower rates and loosen (policies)
- UK shoppers cast off Brexit blues to spend more in November – BRC
- Australia’s ANZ-Roy Morgan Consumer Confidence up to 108.1
- RBA keeps rates at 0.75%, maintains readiness to “ease monetary policy further if needed”
- RBA on hold while waiting for the “long and variable lags in the transmission of monetary policy”
- RBA: lower rates boosted asset prices, which should lead to increased spending on residential construction
- RBA to cut rates in February, then “move to a form of Quantitative Easing” – Westpac
- Japan preparing $120 billion stimulus package as recession risks grow
- Stocks drop as Trump’s Brazil, Argentina tariffs revive trade angst
Upcoming Potential Catalysts on the Forex Calendar:
- Switzerland’s CPI at 7:30 am GMT
- France’s government budget balance at 7:45 am GMT
- Spain’s unemployment change at 8:00 am GMT
- U.K.’s construction PMI at 9:30 am GMT
- Euro Zone’s PPI at 10:00 am GMT
What to Watch: GBP/AUD
As expected, the Reserve Bank of Australia (RBA) kept its interests steady at 0.75% in December.
What traders didn’t expect was that the central bank would talk about the “long and variable lags in the transmission of monetary policy,” which suggests that members are cool with waiting a couple more months before they act on their concerns. Economic firms like Westpac, however, still believe that RBA will still cut its rates as early as February and maybe even pull off a QE next year.
On the other side of the trade, a not-so-weak spending report printed a few hours ago and Tory enjoying a low key consistent lead over Labour could attract some pound bulls.
This is convenient since MarketMilk is pointing out that RSI, Stochastic, Williams %R, and Keltner Channel are all flashing “oversold” signals on GBP/AUD’s 1-hour time frame.
A long trade around the current levels would make for decent good reward-to-risk ratio especially if I aim for the 1.9050 previous area of interest and place my stops just below the 1-hour range.
If AUD bulls maintain their momentum and GBP/AUD ends up breaking lower, however, then previous resistance areas like 1.8800 would make for good profit targets.
Whichever direction you choose to trade, take note that GBP/AUD tends to move by around 120 pips on Tuesdays for the past 30 days.