RBA’s remains on hold, yet hints at future rate hikes

The RBA remained on hold as was widely expected, yet the bank has reiterated its concerns that inflationary pressures still remain high in the economy. In particular, the bank stated in its accompanying statement that “a further increase in interest rates cannot be ruled out”, implying that the bank may increase its interest rates in the future, which could provide support for the Aussie. According to the FT and CNBC, UBS (#UBS) has reported its second quarter loss after rescuing Credit Suisse, yet the loss was lower than expected which could alleviate some concerns. Furthermore, according to the FT UBS will be re-instating its dividend of 0.70 per share in addition to announcing a share buyback program of up to $1bn of shares in 2024, which could provide support for the company’s stock price in the long run. According to Reuters, China’s securities regulator unveiled more curbs on short selling, an indication that the Government may be concerned about the economic stability of the Chinese stock market. As such, the continued intervention could be worrying in the long run, as a lack of confidence in the Chinese economy continues to mount. BoE Chief economist Huw Pill implied yesterday that the possibility of a rate cut is a question of when and not if. Thus, the perceived dovish statements may weaken the pound. Although it should be said that Pill is not “yet confident in inflation to reduce rates”.

WTICash appears to be moving in a sideways fashion, after failing to break below the 71.60 (S1) support level. We maintain a sideways bias for the commodity and supporting our case is the RSI indicator below our chart which quickly moved away from the figure of 30 and is currently at 40, implying that the bearish tendencies on crude oil may be easing. Yet, we should note that the Bollinger Bands appear to be tilted to the downside implying that the apparent alleviation of bearish tendencies could only be temporary. Nonetheless, for our sideways bias to continue, we would like to see the pair remain confined between the 71.60 (S1) support level and the 75.25 (R1) resistance line. On the other hand, for a bearish outlook, we would like to see a clear break below the 71.60 (S1) support level, with the next possible target for the bears being the 68.20 (S2) support base. Lastly, for a bullish outlook, we would like to see a clear break above the 75.25 (R1) resistance line, with the next possible target for the bulls being the 78.65 (R2) resistance ceiling.

#UBS appears to be moving in a relatively sideways fashion. We maintain a sideways bias for the bank’s stock price and supporting our case is the narrowing of the Bollinger bands, which may imply low market volatility, in addition to the RSI indicator below our chart currently registering a figure near 50, implying a neutral market sentiment. For our sideways bias to continue, we would like to see the bank’s stock price remain confined between the 29.00 (S1) support level and the 30.25 (R1) resistance line. On the other hand, for a bullish outlook, we would like to see a break above the 30.25 (R1) resistance line, with the next possible target for the bulls being the 31.30 (R2) resistance level. Lastly, for a bearish outlook, we would like to see a clear break below the 29.00 (S1) support level, with the next possible target for the bears being the 28.05 (S2) support base.

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We note in the European session, the release of Germany’s industrial orders for December, Eurozone’s and the UK’s January Construction PMI figures and Eurozone’s December retail sales. In the American session, we note the release of Canadas’ building permits for December, while later on oil traders may be more interested in the release of API weekly crude oil inventories figure and Kiwi traders in New Zealand’s Q4, employment data. On the monetary front, note that NY Fed President Williams, Cleveland Fed President Mester, Minneapolis Fed President, BoC Governor Tiff Macklem and Boston Fed President Collins are scheduled to speak.