Chart of the day: AUDUSD (05.12.2023)

Today's session in APAC markets was filled with interesting macro readings from the world's major economies. In addition to PMI data from China and inflation from the Tokyo metropolitan area, investors' attention turned to the RBA's interest rate decision. Analysts expected the Bank of Australia to keep interest rates at 4.35%, and that is exactly what happened. However, the market focused on the attached comments by Governor Bullock, which weakened the Australian dollar slightly immediately after the central bank's decision.

Selected statements by Governor Bullock:

• There is uncertainty about the lag and the price/wage response to slower growth.
• Further wage growth is not expected.
• Household consumption outlook remains uncertain.
• Holding the cash rate steady at this meeting will allow time to assess the impact of interest rate increases on demand, inflation and the labor market.
• We will do what is necessary to bring inflation back to target.
• Higher interest rates work to establish a more balanced balance between aggregate supply and demand in the economy.
• Domestically, there are uncertainties about the delayed effects of monetary policy.
• Management is determined to bring the cpi back to target.
• Labor market conditions have also eased gradually, although they remain tight.
• Measures of inflation expectations remain in line with the inflation target.
• The monthly cpi for October suggested that inflation continues to moderate, driven by the goods sector.
• The outlook for household consumption also remains uncertain.
• The limited information on the domestic economy received since the November meeting was broadly in line with expectations.
• Monthly cpi growth suggests that inflation is slowing.
• The board remains determined to bring inflation back to target.
• Whether further monetary tightening is needed to ensure that inflation returns to target within a reasonable timeframe will depend on the data and evolving risk assessment.

The RBA's post-decision statement itself appears neutral, but given that even before the decision, Governor Bullock had been more hawkish in her public comments, the end result falls more on the dovish side. The market also perceived today's decision in this way, and no longer assumes the possibility for another hike in Australia. 

As Barclays analysts added: "We continue to believe that the hike cycle is over, although we note that the bank's data-dependent approach implies the possibility of another hike following the release of Q4 inflation data." The data is due to be released in late January, ahead of the RBA's next meeting on February 6, 2024.

Australia's first full rate cut is currently priced for December 2024.Source: Bloomberg Financial LP

The AUDUSD pair is currently losing nearly 0.63% on an intraday basis and is testing the levels of limits near the support zones set by the daily minima of the last session of November. In case of a breakout below this structure, the next level to watch may be the 200-day exponential moving average (golden curve), which is further reinforced by the 61.8% Fibo retracement of the upward wave initiated in October 2023. The main resistance level could be the local peaks near the 50% Fibo retracement. Source: xStation