RBA hikes rates by full 25 basis points

RBA as was expected delivered a 25-basis points interest rate hike, providing some support for the Aussie against the USD early this morning. In Governor Lowe’s statement the bank stated that “The Board judged that now was the right time to begin withdrawing some of the extraordinary monetary support”. The bank also noted the Australian economy’s resilience which was especially obvious in the labour market while the outlook of the Australian economy remains positive despite ongoing uncertainties like disruption from COVID 19, especially in China and the war in Ukraine.

The bank highlighted that inflation has picked up more than expected and mentioned that it’s “committed to doing what is necessary to ensure that inflation in Australia returns to target over time”, citing also that there are future rate hikes to come in the period ahead. Overall, the bank seems to sound confident and determined to curb inflationary pressures in the Australian economy, while seems to have left behind it any hesitation about tightening its monetary policy, which may continue to provide support for the AUD. Aussie traders are expected to shift their attention towards the release of Australia’s final retail sales growth rate for March and should the rate slowdown as expected or even further we may see AUD bulls having second thoughts.

AUD/USD bounced on the 0.7050 (S1) support line during today’s Asian session, which despite some disturbances was able to overall hold its ground, against the downward pressure. We would expect the pair to initially stabilize somewhat before deciding the direction of its next leg, while we also note that the RSI indicator below our 4-hour chart has risen and reached the reading of 50 which may also imply a rather indecisive market for now. Should the buying interest be maintained we may see the pair breaking the 0.7165 (R1) line, which provided resistance on the 29^th of April and aim for the 0.7285 (R2) level. Should sellers take control over the pair’s direction on the other hand, we may see AUD/USD finally being able to break the 0.7050 (S1) support line and take aim for the 0.6970 (S2) support level which held its ground against the downward pressure of the pair on the 28^th of January.

New Zealand’s employment data due out

Moving across the Tasmanian sea, during Wednesday’s Asian session, we highlight the release of New Zealand’s employment data for Q1. The unemployment rate is expected to remain at 3.2%, which is a rather low level for New Zealand standards, thus implying that the New Zealand employment market is still tight, yet the jobs growth rate is expected to remain unchanged at 0.1% qoq which may imply that the tightening of New Zealand’s employment market is losing steam. At the same time the labor cost index is expected to accelerate and reach 3.1% yoy, if compared to 2.8% yoy and if actually so could imply that the rise of wages may continue to feed inflationary pressures in New Zealand’s economy, thus providing more confidence to RBNZ to continue on its monetary policy tightening path. All of the above could provide some support for the Kiwi, should the forecasts, be realised. Fifteen minutes later RBNZ Governor Andrian Orr is scheduled to have a press conference as the financial stability review is to be released and should he sound hawkish we may see the NZD getting further support.

NZD/USD seemed to bounce on the 0.6415 (S1) support line during today’s Asian session. Nevertheless, we tend to maintain a bearish outlook for the pair as long as it remains below the downward trendline incepted since the 21^st of April. We also note that the RSI indicator below our 4-hour chart is below the reading of 50, also implying that the sellers may have a slight advantage. Should the bears maintain control over the pair’s direction, we may see NZD/USD breaking the 0.6415 (S1) support line which provided support and aim for the 0.6250 (S2) support level. On the flip side should the bulls say enough is enough and take over, we may see the pair reversing course and as a first sign of a changing trend we would expect the pair to break the prementioned downward trendline. After that, we would expect the pair to break the 0.6545 (R1) resistance line and take aim for the 0.6645 (R2) level.

Today’s events and expectations

Today, in the American session we note the release of the US factory orders for March while oil traders may be keeping an eye out for the release of the weekly API crude oil inventories figure while on the monetary front we note the speech of ECB President Lagarde and BoC’s Senior Deputy Governor Rogers.

AUD/USD H4 Chart

Support: 0.7050 (S1), 0.6970 (S2), 0.6895 (S3)

Resistance: 0.7165 (R1), 0.7285 (R2), 0.7390 (R3)

NZD/USD H4 Chart

Support: 0.6415 (S1), 0.6260 (S2), 0.6130 (S3)

Resistance: 0.6545 (R1), 0.6645 (R2), 0.6810 (R3)

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