The Australian dollar started the week lower against its major trading partners after leaders of the Asia-Pacific Economic Cooperation (APEC) group were unsuccessful to agree on a communique for first time in APEC history. China’s President Xi and US Vice President Pence traded barbs that accentuated the differences amongst the two countries on global trade.
Tuesday will see the release of the Reserve Bank of Australia (RBA) Minutes and later in the European session RBA Governor Lowe will deliver a speech titled “Trust and Prosperity” at the Committee for Economic Development of Australia Annual Dinner in Melbourne. The minutes may not reveal much as the RBA has been consistent in reiterating that interest rates are low to support the domestic economy. At November 5th rate decision, the RBA kept the Cash Target Rate unchanged at 1.50% for the 27th consecutive meeting. They also raised their growth forecast in 2018 and 2019 from about 3.0% to about 3.5%, before slowing in 2020.
On November 8th, the RBA also released their quarterly statement on monetary policy and highlighted that official interest rates look set to remain on hold until the employment situation improves and inflation climbs higher. They also reiterated that higher interest rates likely at some point. With inflation back below the RBA’s target range, most analysts are not targeting a hike until late 2019 or early 2020.
The Australian dollar may focus more on Governor Lowe speech since we have not heard from him since Sept 4th, where he reiterated the next move in rates will likely be higher, not lower.
Price action on the AUD/USD daily chart shows that recent bounce from the October low has made a higher high and recaptured both the 50- and 100-day Simple Moving Average (SMA). If we continue to see this bullish bounce, price may find initial resistance from the 0.7400 region. It is around that area that price could form a bearish Butterfly pattern. If the pattern is invalidated, further upside could target the 200-day SMA, which currently trades around the 0.7444 level.
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Ed Moya