Technical Bias: Bullish
- AUDUSD range bound on Monday, as markets turn their attention to the RBA policy meetings.
- US non-manufacturing PMI at 56.5 in March, down from 56.9 in February, according to ISM.
- RBA likely to keep interest rates at 2.25% on Tuesday.
The AUDUSD traded within a narrow range on Monday, as a dearth of economic data shifted the focus to the Reserve Bank of Australia, which is scheduled to release a monetary policy statement on Tuesday.
The AUDUSD advanced 15 pips to 0.7650, as the US dollar continued to backtrack following Friday’s nonfarm payrolls report. The AUDUSD is hovering between its long-term averages (100-day MA and 200-day MA) and faces near-term support at 0.7571. Initial resistance is likely to be met at 0.7698.
The technical indicators support a bigger short-term rally for the pair, but the OB/OS index suggests the Aussie is overbought.
The US dollar is still reeling from last week’s jobs report, which showed the US economy added only 126,000 payrolls in March, the lowest level since December 2013. The US economy is forecast to stall in the first quarter, likely reflecting inclement weather and volatile global demand for US goods.
The US service economy grew at a steady rate in March, the Institute for Supply Management said on Monday. The ISM non-manufacturing PMI eased to 56.5 in March from 56.9 in February, as new orders and exports improved.
Australia had no economic data to report on Monday. On Tuesday the Australian Bureau of Statistics will report on March retail sales. The report is expected to show a 0.4 percent increase in retail sales, following an identical increase the previous month.
The Reserve Bank of Australia will make headlines on Tuesday when it releases its April interest rate statement. The RBA is expected to keep its overnight rate unchanged at 2.25 percent, although speculation continues to be that policymakers may slash interest rates again to help bolster the struggling economy. Australia has been hit hard by plunging commodity prices and a slowdown in mining investment.
However, the RBA probably won’t rush to raise interest rates in order to avoid fanning the flames of the housing market, which has skyrocketed in places like Sydney. Home prices in Australia have increased by around 35 percent since 2012.