15 Apr 2014
RBA minutes next: AUD/USD reaction
FXStreet (Bali) - The RBA April policy board meeting minutes, due at 1.30 GMT, will be the main AUD mover during today's Asian trade, with the primary focus centered around the language used towards the AUD, as well as the housing and job market conditions.
In the last meeting, the RBA tempered its rhetoric on the AUD value, perhaps concerned about the inflation being imported out of a cheaper currency throughout 2013.
I described the wording used towards the Aussie in the last RBA statement as 'soft jawboning', because despite not being as aggressive, they reminded the market that because of the recent rise in the local currency, balanced growth in the economy may be more difficult to achieve.
In the last statement, RBA said: "The decline in the exchange rate from its highs a year ago will assist in achieving balanced growth in the economy, but less so than previously as a result of the rise over the past few months. The exchange rate remains high by historical standards."
On the labour market conditions, the RBA said: "The demand for labour has remained weak and, as a result, the rate of unemployment has continued to edge higher. It will probably rise a little further in the near term."
Since the RBA statement though, and against the odds, the jobs market has actually been unexpectedly picking up, with the jobless rate falling back to 5.8% from 6% and the country creating more jobs than one would think amid the mining boom transition, despite loss of full time positions is still a concern given that last reading was boosted by part-time positions.
After providing the above references to get traders into context, today's Aussie reaction should be determined on how much new insights traders can get out of the RBA stance on the AUD value, jobs market optimism and perception towards the housing market.
Any reduced anxiety on AUD strength, simply through the omission of hard-lines, would be seen as the RBA being more flexible on the AUD value, thus a positive input for the currency. On the flip side, a more explicit message on the undesired high AUD, could see the rate fall as a response. However, given the bullish technicals, any setback should find grateful buyers on dips, with the depth of the retracement contingent to the aggressiveness on the AUD language by the RBA.
While having a minor effect vs AUD language, encouraging comments on the jobs number or renewed concerns over the rising house prices in Australia, will also likely prompt speculators to add into long AUD positions on the assumption of a more hawkish RBA. On the contrary, if the RBA remains pessimistic on jobs and/or thinks that the housing market is still not an area to be overly concerned about, the AUD will fail to find a positive input, an outcome which could serve as an excuse to send the exchange rate lower.
A final note referring to technicals. AUD/USD faces varies layers of demand in almost every 20 pips sequence from .94 down to .9330, thus any setback will likely face a lot more traffic compared to the upside potential, which only sees .9425/30 ahead of .9460 and .95 (larger void areas). If one throws into the mix the bullish tehnicals, it can be assumed that risk remains for further appreciation near term, barring any major surprises in the minutes.
In the last meeting, the RBA tempered its rhetoric on the AUD value, perhaps concerned about the inflation being imported out of a cheaper currency throughout 2013.
I described the wording used towards the Aussie in the last RBA statement as 'soft jawboning', because despite not being as aggressive, they reminded the market that because of the recent rise in the local currency, balanced growth in the economy may be more difficult to achieve.
In the last statement, RBA said: "The decline in the exchange rate from its highs a year ago will assist in achieving balanced growth in the economy, but less so than previously as a result of the rise over the past few months. The exchange rate remains high by historical standards."
On the labour market conditions, the RBA said: "The demand for labour has remained weak and, as a result, the rate of unemployment has continued to edge higher. It will probably rise a little further in the near term."
Since the RBA statement though, and against the odds, the jobs market has actually been unexpectedly picking up, with the jobless rate falling back to 5.8% from 6% and the country creating more jobs than one would think amid the mining boom transition, despite loss of full time positions is still a concern given that last reading was boosted by part-time positions.
After providing the above references to get traders into context, today's Aussie reaction should be determined on how much new insights traders can get out of the RBA stance on the AUD value, jobs market optimism and perception towards the housing market.
Any reduced anxiety on AUD strength, simply through the omission of hard-lines, would be seen as the RBA being more flexible on the AUD value, thus a positive input for the currency. On the flip side, a more explicit message on the undesired high AUD, could see the rate fall as a response. However, given the bullish technicals, any setback should find grateful buyers on dips, with the depth of the retracement contingent to the aggressiveness on the AUD language by the RBA.
While having a minor effect vs AUD language, encouraging comments on the jobs number or renewed concerns over the rising house prices in Australia, will also likely prompt speculators to add into long AUD positions on the assumption of a more hawkish RBA. On the contrary, if the RBA remains pessimistic on jobs and/or thinks that the housing market is still not an area to be overly concerned about, the AUD will fail to find a positive input, an outcome which could serve as an excuse to send the exchange rate lower.
A final note referring to technicals. AUD/USD faces varies layers of demand in almost every 20 pips sequence from .94 down to .9330, thus any setback will likely face a lot more traffic compared to the upside potential, which only sees .9425/30 ahead of .9460 and .95 (larger void areas). If one throws into the mix the bullish tehnicals, it can be assumed that risk remains for further appreciation near term, barring any major surprises in the minutes.