AUD/USD ticks up as NAB sees RBA raising rates in H2, 2018

AUD/USD ticked up to a session high of 0.7780 after the National Bank of Australia  said the RBA could be ready to raise interest rates in the second half of 2018.

The National Australia Bank’s survey of more than 400 firms released today showed its index of business conditions stayed at +14 in September, almost triple its long-run average of +5. Business confidence also rebounded by 2 points to stand at +7.

NAB group chief economist Alan Oster said, "With the labour market poised to see further improvement going into 2018, the economy now seems better equipped to deal with the challenges it faces. If that pans out, the RBA could be ready to raise interest rates in the second half of 2018."

The comments seem to have strengthened the bid tone around the Aussie, although we have not seen a marked improvement in the Aussie-US 10-year yield spread (currently at 47 basis points). The spread remains well below the current month high of  53 basis points. Further gains above 0.7788 (100-DMA) needs to be backed by widening of the yield spread.

AUD/USD Technical Outlook

Jim Langlands from FX Charts writes, "The Aud remains heavy, albeit in a tight range on Monday of 0.7747/81. Something similar looks in store today, with the NAB Business Conditions/Confidence being the only real focus. The short term momentum indicators are neutral, but with the dailies still pointing lower, selling rallies still appears to be the plan. Sell AudUsd @ 0.7780. SL @ 0.7820, TP @ 0.7765 (200 DMA)."