RBA preview - what to expect in AUD/USD?

AUD/USD remains in the middle of the previous months range between 0.7734 and lows of 0.7506, trading spot 0.7609 at the time of writing in early Asia ahead of today's RBA interest rate announcements.

Trump for president, DXY to drop below 92.00

Much of the focus has been with the greenback and US elections, obviously, and continued twist and turns in respect to which candidate is the lesser of two evils. However, for today, sentiment will be driven by the RBA and price action should follow suit. The Aussie has been in neutral mode around the psychological 0.76 handle that has been a pinnacle level on bullish attempts all of 2016.

RBA expected to stay on hold?

However, the balance of risks are to the downside in the Aussie with a tentative RBA, currently on hold on fragile grounds while the vast majority in financial markets and economists consensus for the RBA to leave the cash rate rate unchanged at 1.5%. However, the consensus is in stark contrast to the reality that exists in the country's labour market slack and weakness in core CPI that is at the lowest levels for this year - so could the RBA surprise? Yes they could, but the cash rate futures have put the odds of a 25bps cut at just 4% while east coast property markets and Australian commodity export prices have been improving.

However, no matter whether the bank acts, the accompanying monetary policy statement will receive plenty of attention and markets will be scrutinising the final paragraph and the RBA's policy bias. Housing, inflation and jobs will also be a key area in the statement where we are likely to see reactions in the price of the Aussie as well as being key areas where RBA governor Philip Lowe is focused the most. The decision is scheduled for today at 2.30pm AEDT.

AUD/USD levels to monitor

With current at 0.7609 of time of writing, with resistance ahead at 0.7621 (Daily Classic R1), on Aussie strength through 0.7650, 0.7700 and 25th October highs is first key barrier. "While further gains to around 0.77 are possible during the month ahead, driven in part by the faltering US dollar and yield-chasing flows, the AUD is losing energy (perhaps a reflection of its declining yield advantage)," argued analysts at Westpac, adding, "By year end, there’s a case for a correction towards 0.74 if the Fed tightens in December as we expect. (13 Sep)". For now, next support to the downside can be found at 0.7609 (Daily Open), 0.7604 (Hourly 20 EMA), 0.7602 (Daily Low), 0.7589 (Daily Classic PP) and 0.7588 (Weekly Low) and 0.7506 12th Oct low.