RBA’s interest rate decision to take the spotlight

The USD got some considerable support on Friday across the board, after the release of January’s US employment report, as the NFP figure instead of dropping, rose to reach  517k and the unemployment rate ticked down to 3.4%, showcasing the tightness of the US employment market. The release highlights the possibility of a hawkish Fed and understandably weakened riskier assets such as US stockmarkets which dropped. Also, we note that during today’s Asian session, reports surfaced that BoJ Deputy Governor Amamiya may be the one to replace BoJ Governor Kuroda in April and that the Japanese Government is considering this scenario. The reports have not been reaffirmed from the Japanese Government, yet such a scenario could weaken JPY given that Deputy Governor was regarded as being one of the doves in BoJ. Tomorrow, during the Asian session, we highlight RBA’s interest rate decision and the bank is expected to hike rates by 25 basis points and AUD OIS imply a probability of 91% for such a scenario to materialize, while the rest imply that the bank may remain on hold at 3.10%. It should be noted that the acceleration of the headline CPI rate on a year-on-year level and the relatively tight employment market despite the drop of the employment change figure into the negatives for December, adds more pressure on the bank to tighten its monetary policy. Should the bank proceed with a 25 basis points rate hike as expected, we may see the Aussie getting some support, yet market attention is expected to turn towards Governor Lowe’s accompanying statement. Should the statement maintain a clear, confident, hawkish tone, we may see AUD gaining further. Should the bank express doubts about the possible tightening of its monetary policy the rate hike may turn to a dovish hike weakening the Aussie.

AUD/USD dropped breaking the 0.7010 (R1) support line, now turned to resistance and continued lower to test the 0.6900 (S1) support line, before correcting higher. We tend to maintain a bearish outlook for the pair currently, given also that the RSI indicator is near the reading of 30. Should the bears maintain control over the pair, we may see AUD/USD breaking the 0.6900 (S1) support line and aim for the 0.6800 (S2) support level. Should the bulls take over, we may see AUD/USD extending the correction higher, breaking the 0.7010 (R1) resistance line and aim for the 0.7125 (R2) resistance level.

USD/JPY rose yesterday, breaking the 131.40 (S1) resistance line now turned to support. We tend to maintain a bullish outlook for the pair given also that the RSI indicator is near the reading of 70. Should the buying interest be extended we may see the pair aiming if not breaking the 134.80 (R1) resistance line. Should the sellers be in charge of the pair’s direction, we may see USD/JPY breaking the 131.40 (S1) support line and aiming for the 128.60 (S2) support level.

Other highlights for the day:

Today in the European session, we note the release of Germany’s industrial orders growth rate for December, Eurozone’s Sentix index for February, UK’s construction PMI figure for January and Germany’s preliminary HICP rate for January albeit the release is tentative and could be in the next couple of days, while on the monetary front, we note that BoE’s MPC member Mann speaks. During Tuesday’s Asian session, besides RBA’s interest rate decision, we also get from Australia the trade data for December and Japan’s All Household spending for the same month.

As for the rest of the week

On Tuesday, we get Germany’s industrial output for December, UK Halifax House Prices for January and Canada’s trade data for December. On Wednesday we get Japan’s current account balance. On Thursday, we note the release of the US weekly initial jobless claims figure as well as New Zealand’s electronic card retail sales for January, while on the monetary front, we get from Sweden, Riksbank’s interest rate decision. Finally, on Friday, we get Japan’s corporate goods prices, China’s inflation metrics, Norway’s CPI rates and Canada’s employment data, all being for January, while from the UK we get the preliminary GDP rate for Q4 and from the US the preliminary university of Michigan consumer sentiment for February. 

AUD/USD H4 Chart

Support: 0.6900 (S1), 0.6800 (S2), 0.6720 (S3)

Resistance: 0.7010 (R1), 0.7125 (R2), 0.7285 (R3)

USD/JPY H4 Chart

Support: 131.40 (S1), 128.60 (S2), 126.50

Resistance: 134.60 (R1), 138.15 (R2), 140.50 (R3)

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