AUD/USD remains rangebound heading into April RBA meeting
AUD/USD Holds Steady Ahead of April RBA Meeting.
The Reserve Bank of Australia is expected to keep policy unchanged when it hands down its latest policy decision at 2.30PM AEDT on Tuesday, 1st of April. Few surprises are expected from the RBA, with the markets looking to gauge the likelihood of a rate cut in May, with any volatility in the AUD/USD resting on the dovishness or relative hawkishness of the central bank’s guidance.
(Source: ASX)
The AUD/USD remains driven by three factors. They are, in order of current importance.
- US trade policy. Like almost every other market in the world right, the AUD/USD is swinging on uncertainty about the Trump administration’s trade policy. On the one hand, the AUD/USD has found some support from the trade measures: expectations of weaker economic growth and rate cuts in the US has seen the Greenback weaken. However, the impact of tariffs on economic activity, especially China’s, along with the Dollar favourable dynamics of a narrower trade deficit, is ultimately a headwind to the pair.
- China’s outlook. In the much longer run, Australia’s economic welfare and therefore the AUD/USD remains inextricably linked to the Chinese economy. China continues to confront major macroeconomic problems that won’t go away any time soon. However, from a cyclical perspective, activity has improved recently, with the breakthrough innovations in the tech sector boosting optimism about the country’s long term growth prospects. The dynamic is one reason why the AUD/USD remains off its lows.
- RBA rate outlook. The domestic economy is the tertiary driver of volatility in the AUD/USD. The February cut led to further depreciation in the pair, with the prospect of further rate cuts to come a factor weighing on it further. After this week’s CPI data, there’s hopes the official print next month will show trimmed mean CPI is close to the RBA’s 2-3% target band. Should that materialise, another rate cut in May is increasingly likely.
The other big risks for the AUD/USD on top of the RBA decision is the US tariff announcement and a spate of US labour market data. The pair is coiling up and looking prepared for a break-out. The immediate range is between 0.6260/70 and 0.6330/40. The primary downtrend and the formation of a symmetrical triangle pattern skews risk to the downside. A break of 64 cents and push towards the 200-day MA would be a bullish sign.
(Source: Trading View)
(Past performance is not a reliable indicator of future results)