Australian better economic environment don’t stop rate cuts

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Following recent pools and data from RBA, the Australian economic conditions seem regain ground pushed particularly by the non-mining sector. Service industry for example is one of the best performers, followed by the manufacturing and transport ones. There continue to be doubt on the 2016 GDP (2,6% consensus) related to downside risks, but for 2017 the market is expecting a strong 2,3% rebound.

In the meantime the inflation remains low and the last week’s disappointing Q1 CPI is pushing RBA to consider an imminent rate cut: a 1,3% data against 1,7% expected is pushing investors to think at the possibility of a rate cut (25bp) during the next 2 May meeting.

Moreover the weakness of the Australian Dollar against CAD seem to confirm market doubts, which at the moment see a possible rate cut with a 60% probability.

Despite positive data on the Australian economy, low inflation (which in Q1 touched the lowest level since RBA start his inflation targeting) seem to push the Central Bank to intervene again, reinforcing even more the positive performance of the non-mining sectors.

Currently leveraged funds have increased their Long positions on the AUD, bringing the contracts from 45,2k to 61,2k during the week to 26 April. A bullish position that we had not seen from 2013 and that seems to have a strong influence on the AUD/USD price action.

This cross is currently trading at 0,7607 almost flat on the opening level this morning, with the Aussie that seems not to be able to regain the small loss made during the weekend. A performance capped also by the disappointing data from the National Australia Bank (NAB) Business Confidence and Business Conditions, respectively 5 and 9 (against previous 6 and 12).

Looking at the chart it’s easy to see the first immediate resistance at 0, 7672 after which the gain could extend to the second one at 0,7700.

In case the cross should revert his price action, the first support on the way will be 0,7545.

AUD:USD 02 mag

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