The RBA’s minutes carried a risk of being more hawkish than indicated in their November statement, and it appears that this concern has materialised. The RBA minutes suggest they are still considering another rate hike, though they may refrain from doing so if possible. The timing of a potential hike could be influenced by incoming data, possibly before Christmas. Since there is no meeting in January, a significant CPI report next week might pave the way for a 25bp increase as a holiday surprise.
In the previous week’s quarterly SOMP, the RBA upgraded their inflation forecasts and issued similar warnings about the possibility of “upside surprises to inflation,” serving as a precursor to the recently released minutes. This likely explains the subdued reaction of AUD/USD, which continues to hover around its 200-day EMA.
The RBA is scheduled to convene on December 5 and will not meet again until February 6. This shifts the spotlight onto the monthly inflation report set for November 29, given the absence of a meeting in January.
The Australia Dollar
The Australian dollar is poised for a bullish month, forming a bullish engulfing week and outside day. Sustaining its upward momentum, it has defied a bearish trend below 63c, benefitting from a shift away from a hawkish Fed to a more hawkish . A bullish trend is evident on the 1-hour chart, breaking out of a small continuation pattern despite resistance from the 200-day EMA.
Anticipating a move towards 0.6590, near the weekly R1 pivot and 200-day MA, there’s potential for it to reach 66c. However, with the ongoing US dollar selloff and the possibility of a rebound post-Thanksgiving, a retracement from 66c before the next upward move wouldn’t be surprising. Notably, falling volumes during the rally indicate a gradual loss of bullish momentum.
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