RBA to Hold Interest Rate Amid Economic Uncertainty

The Reserve Bank of Australia (RBA) is expected to maintain its key interest rate at 4.35% for the third consecutive time on March 19 until at least the end of September, as indicated by a Reuters poll of economists. Despite predictions of two rate cuts in the final quarter of 2024, the RBA remains an outlier among major central banks, with no anticipated mid-year rate adjustments. The RBA's decision may also be influenced by the timing of rate adjustments by the U.S. Federal Reserve, with expectations of Fed easing likely to begin in June.

Australia's federal budget for the year ended June 30 is expected to see a smaller revenue upgrade compared to previous years, attributed to declining commodity prices and a softening labor market, according to Treasurer Jim Chalmers. Weaker commodity prices, particularly for iron ore, alongside rising unemployment rates, have led to reduced revenue upgrades. Despite aiming for a second consecutive budget surplus, a greater portion of the revenue upgrades is expected to be spent compared to the previous year.

In efforts to streamline trade and reduce costs for businesses and consumers, Australia announced the removal of import tariffs on various goods, including toothbrushes, toasters, and clothing, effective from July 1. This reform is expected to simplify Australia's trading system, saving businesses over A$30 million in compliance costs annually.

Australia's trade balance in January saw a slight increase to a surplus of A$11.03 billion, driven primarily by a rise in exports, although exports of non-rural goods experienced a decline. The trade surplus has been supported by strong exports, especially to Asia, but concerns over slowing export demand have emerged, particularly concerning Australia's largest market, China. Weak imports also contributed to the larger trade surplus, reflecting subdued local demand due to high interest rates and inflation.

In the U.S., the dollar strengthened following data indicating higher-than-expected producer prices and a decrease in unemployment claims, fueling speculation of reduced rate cuts by the Federal Reserve. Market expectations for a rate cut in the U.S. have diminished for the June meeting to 60%, down from around 67% previously, while projections for 2024 suggest fewer than three cuts.

Despite a slight slowdown in spending, evidenced by a 0.6% increase in U.S. retail sales last month, there remains a conviction in the market that the Federal Reserve will proceed cautiously with rate cuts. Meanwhile, business inventories in the U.S. remained unchanged in January, contrary to economists' expectations of a slight increase, with declines observed in manufacturing and wholesale inventories. This underscores stability across different sectors despite fluctuations in consumer spending and production. Consequently, the Australian dollar could continue to face downward pressure compared to the US dollar due to the ongoing disparity in returns between the two nations, potentially leading to adjustments in either direction based on economic indicators in the near term.

Data for Technical Analysis (30Min) CFD AUD/USD

Resistance : 0.6564, 0.6565, 0.6567

Support : 0.6560, 0.6559, 0.6557

30Min Outlook

Source: Investing.com

Buy/Long 1 If the support at the price range 0.6555 - 0.6560 is touched, but the support at 0.6560 cannot be broken, the TP may be set around 0.6564 and the SL around 0.6553, or up to the risk appetite.

Buy/Long 2 If the resistance can be broken at the price range of 0.6564 - 0.6569, TP may be set around 0.6577 and SL around 0.6558, or up to the risk appetite.       

Sell/Short 1 If the resistance at the price range 0.6564 - 0.6569 is touched, but the resistance at 0.6564 cannot be broken, the TP may be set around 0.6560 and the SL around 0.6571, or up to the risk appetite.

Sell/Short 2 If the support can be broken at the price range of 0.6555 - 0.6560, TP may be set around 0.6550 and SL around 0.6566, or up to the risk appetite.       

Pivot Points Mar 15, 2024 02:48AM GMT