Date: 17 Apr 2019

The meeting minutes from the last Reserve Bank of Australia policy meeting showed that the likelihood of an interest cut is increasing, as RBA members acknowledged that they would consider cutting interest rates if inflation remains weak and unemployment rises. The RBA minutes also showed that policymakers judged that any chances of a rate hike were extremely low as growth figures weaken against the backdrop of falling house prices and household spending.

Most Reserve Bank of Australia board members said they expect a gradual rise in inflation and unemployment as the recent stimulus measures from Chinese policymakers are having a stabilizing effect on the global economy. The RBA is clearly monitoring the situation inside the Chinese economy as it is the Australian economies largest trading partner.

The meeting minutes also showed contrasting views inside the RBA, as some members said that it was not possible to fine-tune outcomes and that holding monetary policy steady would enable the Reserve Bank of Australia to be a source of stability and confidence, which suggests that the RBA are in wait-and-see mode when assessing domestic data.

Focus now turns to Thursday’s job report from the Australian economy, with the nation’s unemployment rate expected to tick-up to five percent, while monthly full-time employment is forecast to increase by 12,000. With the RBA now being more explicit about what they are looking for in terms of domestic to data to cut interest rates, it is likely that the Australian Dollar will be volatile before after these data points are released each month.

The AUD/JPY had a muted reaction to the RBA meeting minutes, with the pair dropping after the minute’s release, but recovered those losses shortly after. The AUD/JPY pair had a breakout week last week, as the yen came under pressure following solid data from the Chinese economy, while the Australian Dollar moved higher.

 

AUDJPY Daily Mountain Chart | Source: ActivTrader

AUDJPY Daily Mountain Chart | Source: ActivTrader 

 

A bullish breakout above the pair’s 200-day moving average has now occurred, with the AUD/JPY pair targeting the 81.00 resistance level. Above the 81.00 level, the 81.25 and 81.68 levels offer solid resistance, while the 80.00 and 79.45 levels currently offer strong supports on any technical pullbacks.

 

Written by Nathan Batchelor, External Analyst

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