We highly anticipate the upcoming CPI data from the RBA. The RBA itself has signaled that muted inflation from this data release would open the door for rate cuts in order to help the domestic economy, and as a result, we should see the Australian dollar pressured as those expectations continue to be priced in. We look at 3 AUD crosses – the AUD/USD, AUD/CAD, and GBP/AUD – as 3 pairs to target if the CPI data acts as a catalyst for further AUD weakness.

In the upcoming Asian trading session the RBA releases its meeting minutes giving us further insight into why the the bank believes growth has undershot expectations and what would be needed to bring about a reduction in rates, provided that inflation remains contained. Will a reminder of the dovish case by the RBA impact and weaken the Australian dollar in the upcoming trading session, especially coming off a weaker GDP reading from China?

If the theme of Chinese and Australian growth being better-than-expected and thereby a move towards carry trade in the Asian Pacific higher yielders gains further momentum – as it did Thursday – we could see AUD and NZD pressing their advantage against the GBP and EUR, reversing some of their weakness from the 1Q.

The AUD/USD managed to pare some of its losses from earlier in the week, and in the upcoming Asian session we await Australia’s employment data. We are already seeing markets pricing in more rate cuts from the RBA so fundamentally the picture favors the bearish outlook. The technicals seem to line up for a bearish outlook as well as we notice a confluence of resistance near 1.0380. We then want sentiment to switch from “risk on” to “risk off”, or a fundamental catalyst like the employment data to give this pair a downward push.