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Although the move was widely anticipated, market participants largely viewed the policy move as hawkish; the RBA remained data-dependent and essentially poured cold water on further easing in the immediate term. RBA Governor Bullock also emphasised this in her press conference. Nevertheless, money markets are still eyeing May’s meeting for another 25 bp cut, with another 25 bp reduction potentially in the books at the tail end of the year.
The RBA highlighted that the Australian jobs market is tight – interestingly, jobs growth for January grew by 44,000, comfortably surpassing market estimates of a 20,000 gain. Alongside this, underlying inflation forecasts were revised slightly higher. However, on the dovish side of things, as already noted, the central bank recognised that inflation had cooled quicker than expected, wage pressures had eased, and growth was subdued in private demand.
Technicals Indicate AUD/USD Downside
Given the RBA’s data-dependent approach, the AUD/USD (Australian dollar versus the US dollar) will be a widely watched pair. As evident from the monthly (left) and daily (right) charts below, price action is shaking hands with reasonably clear resistance.
Coupled with a local ascending resistance on the monthly chart that’s in play (extended from the low of US$0.6170) and a daily resistance zone between US$0.6417 and US$0.6364 (made up of a handful of Fibonacci retracement ratios and a horizontal resistance), this is an area I will be observing closely. Should tomorrow’s inflation surprise to the downside, this could increase rate cut bets from the RBA and weigh on the AUD, consequently supporting a short from the aforesaid resistance to at least daily support from US$0.6288. On the other hand, an upside deviation in the inflation data could push the pair beyond current resistance and encourage breakout buying.
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