Halister News

(Bloomberg) -- AUD/USD’s momentum over past month means risks of upside breakout toward Nov. 8 high 0.7778, unless RBA is orceful in reiteraing otherwise redundant easing bias amid improving data pulse, writes Bloomberg strategist Michael G. Wilson.

• RBA will keep cash rate at 1.50% on Tuesday, according to all but one of 27 economists in Bloomberg survey; announcement due 2:30pm Sydney
• AUD/USD best performer across G-10 this year (up more than 6%) even as OIS curve price down odds of RBA hikes this year to less than 50%, see chart
  • AUD/USD relative strength indicator at 69 confirms strong conviction remains in current move; slow stochastic, though elevated at 81, has retraced from month’s highs
  • Breach of resistance at Oct. 20 high of 0.7734 could open up move toward 0.7778, which was strongest level since April; support seen at 0.7609, Jan. 24 high
• RBA may wait until Friday’s quarterly Statement on Monetary Policy to offer detailed views, at which they may defer again on changes to bias until receipt of 4Q GDP
• Divergence from rate differentials to the U.S., expected or otherwise, has failed to materialize in A$ pressure
  • Absence of wage growth in Friday’s non-farm payrolls saw Fed rate hike pricing finish lower on the week
• Domestically, OIS pricing of potential RBA movements, having regard to weaker-than-expected 3Q16 GDP print, not reflected in recent A$ price action
• UBS wrote in note Monday that “on balance, however, the push from commodities should offset any pull from monetary policy going forward”
• Monday’s retail sales miss sent AUD/USD down 0.2% to 0.7667, with OIS now pricing less than 20% chance of a rate hike by Dec.

NOTE: Michael Wilson is an FX strategist who writes for Bloomberg. The observations he makes are his own and are not intended as investment advice.