RBA to pause rate hikes?

Oil prices tended to jump during today’s opening in the Asian session, as on Sunday OPEC announced a surprise oil production cut of an additional 1.16 million barrels per day. The announcement came in a day before a virtual ministerial meeting and should the meeting confirm the organization’s intentions to rebalance the market at a higher level, we may see oil prices rising further. The announcement also stoked fears for a possible acceleration of inflation in the US causing also the USD to gain at today’s opening across the board and should also Fed policymakers start sounding more hawkish we may see support for the USD growing. We should note though that the USD gained despite the Core PCE price index slowing down both on a month-on-month level as well as on a year-on-year level, in a sign of easing inflationary pressures which allowed US stock markets to be on the rise on Friday, on increasing expectations for a possible easing of the Fed’s aggressive hawkish approach on monetary policy. Yet given the latest development with OPEC it remains questionable whether the market sentiment is to remain risk-on today. On the contrary, we may see traders becoming more cautious, in expectation for the fog created to be cleared before entering buy positions in US equities again. Across the Atlantic, we note the weakening of the HICP rate for the Eurozone in March, which highlighted the easing of inflationary pressures in the Zone as a whole and may allow for the ECB to reconsider the possibility of another rate hike in its next meeting. Across the Channel, the pound tended to strengthen from the acceleration noted in the final GDP rate for Q4, which in turn tended to ease market worries for a possible recession in the UK economy. Last but not least we highlight RBA’s interest rate decision during tomorrow’s Asian session and note that the bank is expected to stand pat. Please note that the bank is expected to stand pat after 10 consecutive rate hikes. Should the bank actually remain on hold as expected, the market’s focus is expected to shift towards RBA’s forward guidance in Governor Lowe’s statement. Should the Governor signal that the bank intends to pause its rate hikes, we may see the Aussie weakening.

EUR/USD continued to drop on Friday after the interruption of its upward movement and broke the 1.0855 (R1) support line now turned to resistance. Given also that the RSI indicator is nearing the reading of 30, we expect the bearish movement to continue, yet we highlight also some tendencies for a stabilisation. Should the selling interest be maintained, we may see the pair breaking the 1.0695 (S1) support line and aim for the 1.0530 (S2) support level. Should on the other hand the pair find fresh buying orders along its path we may see EUR/USD reversing course, breaking the 1.0855 (R1) resistance line and aim for the 1.1000 (R2) level.

AUD/USD edged lower breaking the 0.6700 (R1) support line, now turned to resistance. The drop though remains unconvincing for the pair’s bearish tendencies hence we tend maintain a bias for a sideways motion. For a bearish outlook, we would require the pair to break the 0.6630 (S1) support line and aim for the 0.6565 (S2) level. Should the bulls take over we may see the pair reversing course breaking the 0.6700 (R1) resistance line and aim if not reach the 0.6700 (R2) resistance level.        

Other highlights for the day:

During the European session we note Switzerland’s and Turkey’s CPI releases for March, followed by Turkey’s, France’s, Germany’s, the Eurozone’s and the UK’s Manufacturing PMI index all for March. During the American session, we note Canada’s Manufacturing Index for March followed by the US S&P Final Manufacturing PMI index, followed by the US ISM Manufacturing PMI index both for March. Lastly, during the Asian session, we note Japan’s monetary base for March.

As for the rest of the week:

On Tuesday we note the release of Canada’s Trade Balance for February. On Wednesday, we note the release of Germany’s Industrial Orders for February, Eurozone’s Composite PMI, UK’s Services PMI and the US ISM Non-Manufacturing PMI all for March including New Zealand’s RBNZ interest rate decision . On Thursday we note Australia’s Trade Balance and Germany’s Industrial output both for February, followed by UK’s Halifax House Prices for March, Sweden’s GDP for February, the US weekly Initial Jobless Claims figure and lastly Canada’s employment data for March. Finally, on a US-dominated Friday, we note the US Employment report for March, which includes also the NFP figure.

EUR/USD H4 Chart

Support: 1.0695 (S1), 1.0530 (S2), 1.0430 (S3)

Resistance: 1.0855 (R1), 1.1000 (R2), 1.1140 (R3)

AUD/USD H4 Chart

Support: 0.6630 (S1), 0.6565 (S2), 0.6490 (S3)

Resistance: 0.6700 (R1), 0.6760 (R2), 0.6825 (R3)

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