RBA in the spotlight

The USD tended to remain relatively unchanged against its counterparts as the market enters a busy week ahead full of crucial financial releases and key monetary policy events, starting today with the US ISM manufacturing PMI figure for April. The release may intensify market worries for a possible recession as a possible drop, would imply further contraction of economic activity in the US manufacturing sector for the past month. In the FX market, we note the continuous weakening of JPY due to BoJ’s dovish interest rate decision last Friday and also highlight the release of RBA’s interest rate decision tomorrow during the Asian session. Please note that the bank is expected to remain on hold at 3.6% and should it signal the end of its rate hiking path we may see the Aussie relenting some ground. Please note that inflationary pressures in Australia seem to be easing, yet on the other hand, they still are at very high levels if compared to the bank’s target range of 2.00%-3.00%. Also, we highlight the drop in China’s NBS manufacturing PMI figure for April implying a contraction of economic activity in China’s manufacturing sector, which may have an adverse effect on CNY, AUD and oil prices. Overall in the FX market we have high impact financial releases and monetary policy events that are stemming various countries around the world and could thus create a more balanced trading blend for traders. At the same time oil prices may be put under wider pressure should the Fed hike rates once again as it could imply a weaker demand from the US as well. Other than that, we note that US stock markets seemed to be more optimistic implying a more risk-on appetite as all major stock market indexes ended Friday in the greens. We expect that stock market participants may be influenced by the general market sentiment, yet may also continue keeping an eye out for earnings reports due out during the week.

USD/JPY continued its upward trajectory towards the 137.55 (R1) resistance line. We tend to maintain a bullish outlook for the pair yet note that the RSI indicator has surpassed the reading of 70, which highlight’s the dominance of the bulls yet also may imply that the pair is at overbought levels and ripe for a correction lower. Should the bulls maintain control over the pair, we may see it breaking the R1 and take aim of the 140.65 (R2) resistance level. Should the bears be in charge of the pair’s direction, we may see USD/JPY reversing course breaking the 135.15 (S1) support line and aim for the 132.85 (S2) support level.  

AUD/USD edged higher, nearing the 0.6640 (R1) resistance line. We tend to maintain our bias for the sideways motion to continue, given that the pair was unable to break above the R1 which forms the upper level of its range-bound movement. Should the bulls take over, we may see the pair, breaking the R1 and aim for the 0.6700 (R2) resistance level, while if the bears take over, we may see the pair breaking the 0.6675 (S1) support line and aim for the 0.6490 (S2) support level.   

Other highlights for the day:

During the American session Canada’s Manufacturing PMI and the US ISM Manufacturing PMI figures for April. Please note the release of the FED’s internal review of the SVB failure.

As for the rest of the week:

Tuesday, during the European session we note the UK’s Nationwide House Price on a MoM basis and the Czech Republic’s Preliminary GDP rate, the Eurozone’s Preliminary HICP rate all for the month of April and the US Factory Orders for March. On Wednesday we get Turkey’s CPI rate for April,  CNB’s interest rate decision and in the American session, we have the US ISM Non-Manufacturing PMI figure for April and the highlight of the day is to be the Fed’s interest rate decision. On Thursday, we get New Zealand’s HLFS Unemployment data for Q1, Australia’s Trade data for March, China’s Caixin Manufacturing PMI for April, UK services PMI figure, the US Weekly Initial Jobless Claims, Canada’s Trade data for March and on the monetary front we note the release of Eurozone’s ECB and Norway’s Norges bank interest rate decisions. On Friday, we get the US employment report for April and note Canada’s employment data for the same month.

USD/JPY H4 Chart

Support: 135.15 (S1), 132.85 (S2), 130.50 (S3)

Resistance: 137.55 (R1), 140.65 (R2), 142.45 (R3)

AUD/USD H4 Chart

Support: 0.6575 (S1), 0.6490 (S2), 0.6400 (S3)

Resistance: 0.6640 (R1), 0.6700 (R2), 0.6790 (R3)

If you have any general queries or comments relating to this article please send an email directly to our Research team at research_team@ironfx.com

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