When is the RBA and how could it affect AUD/USD?

RBA interest rate decision preview

The Reserve Bank of Australia (RBA) is about to announce its final interest rate decision for 2017. The central bank will almost certainly keep the cash rate steady at 1.5%, so again the focus will be on bank's take on business investment, the labor and housing markets, the outlook for the household sector and the impact of gyrations in the exchange rate.

FXStreet Chief Editor Ivan Delgado says, "the RBA can justify sitting in its comfort zone of neutrality, with arguments to be made for both a future increase or decrease in rates. On one hand, lower incomes being outpaced by household debt, lower inflation expectations, coupled with sluggish consumer spending are not a 'pretty combination' nor lays the foundation to be overly optimistic. On the other hand, the labor conditions and investment projections are at healthy levels. The RBA can and will find enough reasons to justify further room for future monetary policy considerations; there is essentially zero need to rush. Such stance, unlikely to be altered in the near term, will result in depressed expectations in RBA cash rate changes."

How could the RBA decision/statement affect AUD/USD?

AUD/USD seems to have found a near-term bottom at 0.7532, courtesy of the bullish price-RSI divergence on the dailies and a breach of the descending top pattern. As of writing, the spot is at 0.7630 levels. A move above 0.7645 (Nov. 27 high) would open up upside towards 0.7691 (200-day MA) - 0.7707 (50-day MA). Further gains could be hard to come as the 50-day MA is fast approaching the 200-day MA for the negative crossover.

On the downside, breach of support at 0.76 (psychological level) could yield a pullback to 0.7551 (Dec. 1 low). A violation there would expose the recent low of 0.7532.

Jim Langlands from FX Charts says, "near-term momentum indicators look mixed on Tuesday, suggesting a cautious stance ahead of the RBA and the Retail Sales.  It could be quite a choppy session, but overall I still prefer be short Aud$ as we approach the FOMC next week when the Fed is expected to hike rates. I, therefore, suspect that further upside for the Aud will be limited and selling into rallies is still preferred."

Key Notes

RBA preview: Justifiable to sit in its comfort zone of neutrality

AU-US 10Y spread at a 17-year low, AUD no longer a high yielding currency?

AUD/USD Forecast: Indecision ahead of data-heavy week

AUDUSD: The near-term momentum indicators look slightly positive

AUD/USD analysis: above 0.7600, but upside still limited

About the RBA interest rate decision 

The RBA Interest Rate Decision is announced by the Reserve Bank of Australia. If the RBA is hawkish about the inflationary outlook of the economy and raises the interest rates it is positive, or bullish, for the AUD. Likewise, if the RBA has a dovish view on the Australian economy and keeps the ongoing interest rate, or cuts the interest rate it is seen as negative, or bearish.