Aussie Dollar softens ahead of RBA rate decision


The Aussie Dollar (AUDUSD) continued its softer tone ahead of tomorrow’s interest rate announcement by the Reserve Bank of Australia (RBA). If, after two years of leaving rates untouched the RBA were to surprise the market with a hike the effects would be considerable. That’s not a scenario the market believes is likely though, with the chances of an interest rate rise rated as zero by the market in the face of an un-cooperative housing market and wage growth that is not going anywhere anytime soon. The most likely place to find clues for future interest-rate policy will be contained in the statement accompanying the actual decision, and whose wording is likely to have deliberately chosen in order to convey the minimum amount of information in the maximum amount of space.  We don’t see any particular reason to establish longs here, as the market remains bearish - and with good reason. The market is generally short, and short markets are vulnerable to corrections, particularly in the case of the Aussie, where liquidity is not as deep as people think, particularly during European & NY sessions.

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