GROWTHACES.COM Forex Trading Strategies
Taken positions
AUD/NZD: long at 1.0950, target 1.1300, stop-loss 1.0830, risk factor **
AUD/JPY: long at 88.30, target 91.00, profit locked in at 88.60, risk factor **
AUD/USD: RBA On Hold, As Expected
(stay sideways)
- Australia's central bank kept interest rates steady for a seventh month today, as expected.
- RBA Governor Glenn Stevens said: “The Board again judged that the prospects for an improvement in economic conditions had firmed a little over recent months and that leaving the cash rate unchanged was appropriate.” He added that while the local economy is suffering from lower priced commodities, falling terms of trade and low capital investment, the economy is slowly transitioning to non-mining-led growth.
- Policymakers have been encouraged by signs of recovery ranging from strong employment to better business sentiment and a big boost to tourism from a low local dollar.
- Data due on Wednesday (0:30 GMT) should show the economy regained some momentum in the third quarter after a lacklustre second quarter. Net exports alone likely added an eye-popping 1.5 percentage points to growth - their biggest contribution since early 2009 - as export volumes jumped 5% while imports fell 2%. The contribution from trade helped offset a drag from government investment which dropped over 9% in the third quarter from the previous three months, partly due to a fall in defence spending.
- After strong trade data we have raised our third-quarter GDP forecast to 0.8% qoq, above the market consensus of 0.7% qoq.
- Supporting activity has been a boom in home building which looks to have some time to run yet. Approvals to build new homes surprised by rising 3.9% October, with approvals for multi-unit blocks were up almost 30% on a year ago.
- Interbank futures still imply around a 50-50 chance of an easing next year, with the RBA's next meeting in early February. In our opinion the likelihood of another rate cut is very low. We assume that the next interest rate change in Australia will be a hike.
- The RBA decision supported the AUD. We keep our constructive view on the AUD. We have locked in profit on our AUD/JPY long at 88.60. We have used today’s fall in the AUD/USD to open long position at 1.0950. But we stay sideways on the AUD/USD because of broad USD strength.
Significant technical analysis levels:
Resistance: 0.7307 (high Oct 19), 0.7337 (high Oct 16), 0.7363 (high Oct 15)
Support: 0.7223 (low Dec 1), 0.7171 (low Nov 30), 0.7160 (low Nov 23)
Source: Growth Aces Forex Trading Strategies