Trading volatility in the week starting 4/12/23: RBA rate decision
Having raised rates at its last outing, unlike the BoE, Fed and ECB, the Reserve Bank of Australia (RBA) remains on the front foot in its fight against inflation.
Has it done enough or will it keep the pressure on inflation and retain its hawkish rhetoric? If so could it see further gains for the Australian dollar? IGTV’s Jeremy Naylor looks at the potential for further upside for the AUS/USD trade.
(AI Video Transcript)
The Reserve Bank of Australia
The Reserve Bank of Australia (RBA) is a central bank that is going to make a decision about interest rates. The RBA had already increased rates in September and now people are wondering if they will raise rates again to fight inflation. This decision will affect how the Australian dollar trades against the US dollar, and there might be some ups and downs in the market because of it.
The Australian dollar
Although some people are worried about the economy and high interest rates, the RBA wants to control inflation in the long term, so they are likely to continue with their strong stance. If the RBA's decision shows that they are still being strong, the Australian dollar will probably increase in value compared to other currencies. Recently, the Australian dollar has been doing well and could rise even more if the RBA stays strong.
For traders who have invested in the Australian dollar, it's a good idea to set a stop level at 65.50 cents to protect against any potential decrease in value. The next level where the Australian dollar might face resistance is at 68.21 cents, but that would only happen if the RBA makes very strong comments and raises rates significantly. However, there is also a chance that the Australian dollar could reach 67.38 cents before any potential decrease if traders are betting on the RBA's decision being strong. Overall, the market is eagerly waiting for the RBA's decision on interest rates and how it will impact trading. We want to know if the RBA will continue being strong or if they will be more careful because of concerns about the economy. This decision will likely affect how the Australian dollar trades and could even lead to more gains against other currencies.
This information has been prepared by IG, a trading name of IG Markets Limited. In addition to the disclaimer below, the material on this page does not contain a record of our trading prices, or an offer of, or solicitation for, a transaction in any financial instrument. IG accepts no responsibility for any use that may be made of these comments and for any consequences that result. No representation or warranty is given as to the accuracy or completeness of this information. Consequently any person acting on it does so entirely at their own risk. Any research provided does not have regard to the specific investment objectives, financial situation and needs of any specific person who may receive it. It has not been prepared in accordance with legal requirements designed to promote the independence of investment research and as such is considered to be a marketing communication. Although we are not specifically constrained from dealing ahead of our recommendations we do not seek to take advantage of them before they are provided to our clients.
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