Here’s an excerpt from Gov. Phillip Lowe’s address to the Australian Business Economists Annual Dinner last week, “If the economy continues to improve as expected, it is more likely that the next move in interest rates will be up, rather than down. But the continuing spare capacity in the economy and the subdued outlook for inflation mean that there is not a strong case for a near-term adjustment in monetary policy.” Full speech here
So this does not say that we are expecting a hike at the next RBA meeting though we do have an RBA meeting coming up on the 5 December. How is the market going to position itself as we head into this meeting? The only inflation-related data we will see before the next meeting is retail sales which is due to be released on the day of the meeting.
With the release of dovish FOMC minutes last week, market participants may see a less aggressive path for US rate hikes in 2018 and therefore look to capitalize on the higher interest rate differential of the Aussie against the Buck over the coming weeks. Perhaps Gov. Lowe’s comments help fuel a rally. Maybe we continue to see continued appreciation in both Aussie and Kiwi in the weeks ahead.
In a post I uploaded last week I discussed a move higher in Gold and Copper potentially resulting in a stronger Aussie with Kiwi following suit due to antipodean correlation, a day or two later price double bottomed and made a higher high on AUDUSD and NZDUSD. Since that post Gold has still failed to break out though we continue to see strong bids and are not making lower lows, Copper has moved higher off the support as per the analysis provided in last week’s post and we have seen a move higher in the Baltic Dry Index from the 16 November, which of course correlates with the move higher in Copper at around the same time. (Last week’s post)
As far as technicals are concerned, Bulls aren’t out of the woods yet though recent price action is definitely worth paying attention to. I have not included AUDJPY or NZDJPY in this post as neither of those pairs have made a higher high yet on Daily, H4 or H1. I will post an update to this plan once that has happened.