RBA Stay Confident About 2% Cash Rate

On Monday, the AUD/USD’s trend was influenced mostly by the Chinese release of Q3’s (3^rd quarter) GDP (Gross Domestic Product). The figure surpassed the expected 6.8% yoy (year-on-year), coming in at 6.9% yoy, but still under the previous level of 7% yoy and posting also at the lowest level from the beginning of the financial crisis. The pair’s spot was at about 0.7240 (below the 200 SMA – Simple Moving Average) on the hourly chart in Monday’s early session, with a 20/200 bearish cross starting to take shape; moving forward the price rallied approximately 45 pips, but came back to recover the spike’s difference staying flat for the rest of the session. The RBA’s (Reserve Bank of Australia) minutes from yesterday pushed the trend marginally higher than the previous day, the major commodity currency going up almost 20 pips towards the 200 DMA (Daily Moving Average) for the hourly candles. RBA announced that it will adhere in the near future to the current policy, declaring that the earlier rate reductions are continuously supporting the aggregate demand and thus expectations for Q3 are higher for the second half of the quarter.

Also on Tuesday, BOE’s (Bank of England) McCafferty stated that a rate hike is coming, although there is an uncertainty regarding the direction – up or down of the previous mentioned, as the economy is biased. McCafferty also mentioned the recent increase of downside risk in the economy, still with the probability of the QE having a positive effect. Due to the fact that the core CPI is so much higher than the headline CPI, there is a risk of overshooting the inflation target for 2017.

Later in the day, the US Government released housing data which puts latest values at a 6.5% increase in September, with an annualized $1.21 million figure, over the expected $1.15 million and over August’s $1.126 million. Although housing stats declined in the previous 2 months, September’s rise equivalents June’s at an 8-year high. At the same time, building permits (gauge for future demand) went down 5% in September, reaching $1.10 million. Also, multi-family permits hit December, 2014’s low and permits for single-family homes dropped 0.3%.

Oil price has recovered from a session-start drop and started to target the $46.00/br. mark on Tuesday. The main support of yesterday’s direction was the softer tone of today’s USD and also sentiment coming from hopes in continuation of the downtrend.