RBA interest rate decision weigh on bullish AUDUSD

Key Points

• RBA to give its rate decision
• Little change in policy is expected
• AUDUSD look for directions on the RBA rates

RBA to give interest rate for March

The RBA is set to give its interest rate for March with little change is expected from the policy in its meeting that could weigh in on the Aussie Dollar movement in the markets. With the announcement of the reserve bank to extend its quantitative easing program, and reinforcing Australia’s economic outlook. In the February meeting, the RBA provided a guideline for policy in the short and medium-term. Nevertheless, the recent volatility in the bonds market has undermined the central banks, with the Aussie Dollar trading higher. The markets will follow what the RBA may say or do to maintain the markets’ confidence.

The upcoming RBA meeting’s interest rate decision will be mostly eyed in the market, as the central bank rushes to protect its 3-year yield target against reflation trade and volatility in the bond market. The interest rate is expected to be kept unchanged, and the tone of the speaker will influence the market movement.

The main talking points of the markets in recent days have been the bond market’s volatility. As confidence for economic growth, and as investors expect fiscal authorities to keep pouring money into the economy, helping the bonds to rally up and destabilizing the markets and going against the central banker’s decision to keep interest rates unchanged. The markets will wait to hear the action of RBA in the bond market, and if it is going to take any actions in the future.

The Aussie Dollar has recently pulled back from its bullish rally in recent market volatility, although the long-term outlook for AUDUSD remains bullish, thanks to the bullish sentiment in the Aussie, softer Dollar movement, a surge in the commodity prices, and higher Australian bond market.

Technical outlook

The recent market volatility has placed the AUD/USD under pressure and in a very interesting position ahead of the RBA meeting. The market fundamentals are mostly to support the demand for AUD/USD, rally in the commodity price, and the RBA falling behind in expanding its balance sheet.

Technically, the AUD/USD remains at strong bullish outlook, as the prices continue to track within the ascending channel and the market stays strong above $0,75. The RBA tone will draw interest for the bullish Aussie Dollar and put more buying pressure on the market.

A breach above the $0.8115 could put the Aussie in a very positive position for recovery against the Dollar.

Lulama Msungwa

Research & Markets Analyst

Scope Markets