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AUD/USD: Ascent stalled above 10-day MA as RBA on hold and China PMI missed estimates

5/4/2018, 11:02:48 AMMarket Analysis
AUD/USD: Ascent stalled above 10-day MA as RBA on hold and China PMI missed estimates

The AUD/USD pair has moved above the descending (bearish) 10-day MA located at 0.7549 but the rally seems to have stalled as the Reserve Bank of Australia (RBA) Statement of Monetary Policy (SoMP) showed the central bank is unlikely to hike rates in the near-term

Key points (Source: Reuters)

Board sees no strong case for near-term move in the cash rate. 

If the economy improves as expected, higher rates likely to be "Appropriate" at some point

A "Significant" appreciation in the a$ would dampen growth and inflation

Growth forecasts unchanged, inflation and unemployment nudged up in near-term

Unemployment forecast at 5.5 pct end 2018 (from 5.25 pct), 5.25 pct out to mid-2020

Underlying inflation forecast at 2 pct dec 2018 to Dec 2019, rising to 2.25 pct by mid-2020

GDP growth forecast at 3.25 pct dec 2018 and Dec 2019, 3 pct by mid-2020

The labour market will still have the spare capacity by mid-2020, NAIRU could be lower

Data revisions show more resilient household consumption, solid growth seen for q1

The rise in US money market rates has raised funding costs for Australian banks

A significant escalation of trade protectionism could derail global 

Meanwhile, the China Caixin services PMI for April came in at 52.9, missing the estimate of 53.4 exp, but slightly above the previous month's print of 52.3. Both the RBA SoMP and the China services PMI release offered little/no positive surprises, thus leaving the AUD/USD pair at the mercy of the market's appetite for the US dollars. 

The currency pair may fall back below the descending (bearish) 5-day MA located at 0.7519 if the US wage growth numbers (due later today) beat estimates. 

AUD/USD Technical Levels

As of writing, the pair is trading at 0.7554. A close above the descending 10-day MA of 0.7550 would mean a temporary low is in place at 0.7473 and could yield sideways to positive action in the short-term. The key resistance levels are 0.7625 (Oct. 27 low), 0.7654 (Dec. 5 high), 0.7673 (200MA on 4-hour). 

On the other hand, a close below the descending 5-day MA of 0.7519 would shift risk in favor of a drop to 0.7473 (May 1 low). A violation there would expose support lined up at 0.7440 (Apr. 27 low) and 0.74 (psychological support).