Article Highlights

  • RBA keeps interest rates at 1.50% as expected
  • AU AIG construction index up from 47.0 to 47.7
  • U.K. BRC retail sales monitor slips by 0.6% vs. 1.0% previous
  • NZ inflation expectations up by 1.9% vs. 1.7% previous
  • Japan’s leading indicators shoots up from 102.8% to 105.2%
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Risk aversion was the name of the game during the Asian forex trading session, though comdolls like the Aussie and Kiwi snagged a pip or two (or twenty) from bullish, currency-specific news.

Major Events:

RBA keeps rate steady – For a sixth meeting in a row, the Reserve Bank of Australia (RBA) kept its interest rates steady at 1.50%.

The central bank’s statement – its first this year – mostly signaled good things about the economy. Here’s a summary of their main points:

  • China, its largest trading partner, sported strong growth in H2 thanks to more infrastructure and property construction spending.
  • Higher commodity prices are providing “a boost” to Australia’s national income.
  • Weak Q3 GDP mostly reflects “temporary factors” and that a “reasonable growth” is expected in Q4.
  • RBA continues to expect 3.0% growth over the next couple of years, with growth being supported by export increases and period of declining mining investment coming to an end.
  • AUD’s depreciation since 2013 has helped in the transition from the mining boom, but an appreciating exchange rate “would complicate this adjustment.”
  • Current policies are “consistent with sustainable growth” and “achieving the inflation target over time.”

The main takeaway for traders here is that the RBA thinks current policies are already enough to push growth and inflation to its goals. Naturally, the prospect of an end to the RBA’s rate cut spree sent the Aussie higher across the board.

Overall risk aversion – Risk aversion was the name of the game during the Asian session, as market players stay in the sidelines ahead of Shinzo Abe’s meeting with Trump on February 10 – 11.

It also doesn’t hurt that U.S. equities started the week on a weak note yesterday, and that oil prices took a tumble after bullish speculative moves have been exhausted. Increasing political dramas in the euro region also aren’t helping, with France’s Marine Le Pen officially launching her Presidential bid by vowing to push for an EU referendum.

Nikkei is down by 0.24%, the Shanghai index also dipped to 0.31%, the Hang Seng index slipped by 0.16%, and Australia’s A SX 200 is down by 0.06%.

Major Market Movers:

AUD – The Aussie popped up against its major counterparts as soon as the RBA hinted that it might be done with rate cuts for the time being.

AUD/USD shot up by 16 pips (+0.21%) to .7673, AUD/JPY jumped by 25 pips (+0.29%) to 85.87, and EUR/AUD dropped by 78 pips (-0.56%) to 1.3957.

NZD – The Kiwi also had a good session after long-term inflation expectations for New Zealand’s businesses clocked in at 1.9% in Q4 2016, the highest reading since Q3 2015.

NZD/USD shot up by 45 pips (+0.62%) to .7365, NZD/JPY jumped by 57 pips (+0.70%) to 82.41, and AUD/NZD fell by 43 pips (-0.41%) to 1.0418.

Watch Out For:

  • 7:45 am GMT: Switzerland’s SECO consumer climate (-11 expected, -13 previous)
  • 8:00 am GMT: German industrial production (0.2% expected, 0.4% previous)
  • 8:45 am GMT: French government budget balance
  • 8:45 am GMT: French trade balance (-4.2B EUR expected, -4.4B EUR previous)
  • 9:00 am GMT: Foreign currency reserves
  • 9:30 am GMT: U.K. Halifax house price index (0.2% expected, 1.7% previous)

See also:

U.S. Session Recap
London Session Recap

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