Australian dollar to retrace on rates

See the latest Australian dollar analysis here:

Macro Afternoon

This is how I reckon the currency guys might take the RBA’s no move announcement. It may be different to my fellow bloggers or the economists but then again currencies are traded by different people.

The release of the RBA’s Board Meeting Communique had something in it for every one:

  • A nod to the mining sector on the one hand and household weakness on the other.
  • As dovish on employment as I thought but probably more so than the market expected.
  • Business Credit still relatively constrained
  • AUD is doing some of the heavy lifting of monetary policy – regardless of what Adam Carr says.
  • Inflation has probably bottomed but not a worry yet…need to see this quarters numbers in July to make August “LIVE”
  • Growth to be at or around trend

So rates on hold but a bias to tighten still. So to the chart:

This is the hourly to round out yesterday’s piece. We see that the AUD rejected out 1.1014 level for two hours last night and is braking below the hourly uptrend. My guess would be a move to the 38.2% retracement of this move – 1.0794 as a first look at support.
We’ll see how it goes there.

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  1. DFM, how do you think forex AUD traders would respond to another RBA hold on rates, say, in a month’s time, all else being much the same?

    • Deus Forex Machina

      If that happens, which is what I’d expect if as you say all else stays equal, it will depend on the words the Governor uses…

      Interest rate strategists are already saying this is more hawkish than the last and it is the RBA setting up for the eventual rate hike.

      But we are probably going to get a growth outturn in June of below 2% according to Datasword so this is gooing to get interesting.

      If the AUD ralllies back toward 1.10 and rejects it again you’ll know we are going lower

  2. DFM
    Australian dollar is seasonally weak in May. Do you know if there is a reason behind it or simply a coincidence?

    • Deus Forex Machina

      yeah its interesting…but I think its not just the aud…last year on this week in May I put out a piece to clients saying “risk off” for everything and we know what happened for the next few months…

      i’ll have a look at seasonality and see if I can draw any conclusions in the next week or so

  3. Whoa…just checked the AUD/USD and it’s 1.087….from 1.094…what gives?

    Profit taking?

    Or is their a sentiment of a flattening IR trajectory?? (which, IMHO, would take some steam of out the AUD…)


  4. I reckon the AUD is retracing more on renewed USD strength than it is on interest rates.

    Along with AUD/USD, EUR/USD and GBP/USD are both also showing signs of weakness, the GBP/USD possibly on higher degree charts (weekly) than the other two:

    It’s premature to be calling a USD bottom of any great significance, but the early signs are coming through on the charts… worth keeping that in mind.

    Usual disclaimer applies: Anything could happen, and most likely will. (I can’t remember where I first saw this phrase, does anyone recognise it?)