RBA Surprises with Rate Hike, Boosting AUD
06 June 2023
Tuesday begins with a surprise announcement from Australia, where the RBA has decided to raise interest rates by another 25 basis points. This decision caught most economists off guard, as they were anticipating rates to remain unchanged. As a result, the Australian Dollar (AUD) has emerged as the strongest currency in the pack, with the New Zealand Dollar (NZD) also experiencing gains, given its high correlation with the AUD.
Although today's economic calendar is not heavily packed, there are a few key releases worth noting. European traders will be focused on the Construction PMI from the UK and retail sales data from the Eurozone. Additionally, after the opening of the American session, we will receive the Ivey PMI from Canada, which is expected to come in at 57.2.
Just a few minutes ago, we received comments from BoJ's Ueda, who stated that the Bank of Japan (BoJ) will continue its quantitative and qualitative easing (QQE) program until the inflation target is achieved. This announcement has led to a slight strengthening of the Japanese Yen (JPY), although the impact has not been significant.
On Monday, we observed a correction in the USD and indices. EURUSD has entered a mid-term sideways trend, but sellers still maintain the upper hand in the long-term. A particularly interesting situation can be found on USDCHF, as the price has fallen back below the 0.907 support level and has also broken the lower boundary of a flag pattern. This sets a negative tone and triggers a sell signal. USDCAD is also bearish, with the price aiming for the lower boundary of a symmetric triangle once again. A breakout from this pattern could provide a valid long-term sell signal.
Indices also experienced a minor correction, but the drop was minimal, and buyers continue to hold the upper hand. We also witnessed a decline in the price of oil, as it closed the weekend gap created after Saudi Arabia's production cut announcement. While these announcements may offer short-term opportunities for scalpers, their long-term implications are limited. In general, production cuts rarely lead to positive long-term outcomes, as exemplified by the downward swing in oil prices that followed the OPEC+ cut announcement in early April.