Trusted by over 15 Million Traders
The Most Awarded Broker
for a Reason
CATEGORIES
market analysis
Inflation is soaring but no action is being taken? The Reserve Bank of Australia will decide tomorrow to hide the trap of "double killing of eagles and doves"
Wonderful introduction:
One person’s happiness may be fake, but the happiness of a group of people can no longer distinguish between true and false. They squandered their youth to their heart's content, wishing they could burn it all away. Their posture was like a carnival before the end of the world.
Hello everyone, today XM Forex will bring you "[XM Foreign Exchange Decision Analysis]: Inflation explodes but no action is taken? The RBA's decision tomorrow hides a "hawk and dove double kill" trap". Hope this helps you! The original content is as follows:
During the European session on Monday (November 3), the exchange rate of the Australian dollar against the US dollar fluctuated in a narrow range around 0.6550, rising slightly by about 0.10% during the day. The market's focus is on the monetary policy decision to be announced by the Reserve Bank of Australia on Tuesday, while the US dollar index continued its strong trend, hitting a three-month high of 99.90, putting the exchange rate under pressure below the key resistance range.
The divergence of Fed policy expectations adds to market uncertainty
Last week the Federal Reserve cut interest rates by 25 basis points as scheduled, but Chairman Powell's hawkish words caused ripples in the market. He emphasized that in the context of rising inflation and stagnant labor market, the formulation of monetary policy faces many challenges, and clearly warned the market not to have too high expectations for further easing during the year. This statement caused the probability of an interest rate cut in December to fall sharply from 91% before the meeting to 67%. As a result, the US dollar gained support, and the index rose by more than 1% in a single week.
However, policy differences have not subsided. Federal Reserve Governor Waller recently gave a speech in which he expressed the view that continued easing is still necessary to support the cooling labor market, which is in sharp contrast to Powell's stance. Such divisions within policymakers are enough to throw currency markets into disarray, with traders struggling to find direction amid conflicting signals. At present, the Federal Reserve must not only deal with the pressure of rebounding inflation, but also take into account signs of weakness in the labor market, and the ambiguity of its policy path has increased significantly.
The vacuum of economic data this week has exacerbated market confusion. The non-farm payrolls report and job vacancy data are both absent. Only the ADP private sector employment data will be released on Wednesday, which forces the market to regard it as the only indicator of the Fed's next move. In a data-poor environment, any economic indicatorThe fluctuations may be amplified and the market volatility is expected to remain high.
Tightening liquidity has become an invisible driver of the US dollar
What the market should pay more attention to now is the real driving force hidden under the surface: liquidity conditions. Currency markets showed signs of tightening as the U.S. Treasury replenished its coffers. The theme of "looking for dollars" has returned again. The use of overnight repurchase agreements soared to $50 billion last Friday. In order to maintain the smooth operation of the capital chain, banks had to pay the upper limit of the Fed's target range interest rates. This liquidity squeeze is quietly supporting the dollar, with risk currencies struggling to find a footing even as risk appetite ramped up last week.
This liquidity pressure may also be affecting broader market performance. The U.S. government shutdown has entered its 34th day, and Congress is deadlocked on an appropriation bill supported by Republicans. Trump again urged Republican senators to end the shutdown by abolishing the filibuster rules, an unprecedented move that is still being resisted by Republican leadership. Concerns about the economic damage a prolonged shutdown could cause have further bolstered risk aversion.
The decision of the Reserve Bank of Australia has become the key to the short-term fate of the Australian dollar
In terms of the Australian dollar, the market is waiting with bated breath for the Reserve Bank of Australia's policy statement on Tuesday. Economists generally expect the central bank to keep the official cash rate unchanged at 3.6%, as the third-quarter consumer price index released last week showed that inflationary pressure accelerated faster than expected on both the consumer and wholesale sides. Data from the Australian Bureau of Statistics showed that the producer price index increased by 1% from July to September, higher than the expected 0.8% and the previous value of 0.7%. During the same period, consumer inflation increased by 1.3% month-on-month, also exceeding expectations of 1.1% and the previous value of 0.7%.
Monday’s U.S. economic agenda includes data on manufacturing activity. The S&P Global Manufacturing PMI is expected to confirm activity in the sector accelerated to 52.2 in October from 52.0 in September, while the ISM Manufacturing PMI is expected to show further contraction, falling to 49.2 from 49.1 last month, but the price sub-index showed inflationary pressures rising to 62.6 from 61.9.
Technical aspect:
From the 30-minute K-line chart, the exchange rate of the Australian dollar against the US dollar is currently running within the box range of 0.6540 to 0.6560. In terms of price structure, the exchange rate formed the prototype of a double top pattern at 0.6559 and 0.6562. These two high points formed a short-term resistance band. At the same time, the horizontal support line of 0.6540 has become an important line of defense for bulls.
Judging from the K-line pattern, the recent price fluctuations have narrowed, and the upper and lower edges of the box have been tested many times but failed to effectively break through, indicating that the long and short sides have fallen into a stalemate in this area. This convergence trend often indicates the brewing of a directional breakthrough, but the direction of the breakthrough still needs to be further confirmed.
Based on xmaccount.comprehensive technical indicators, the Australian dollar against the US dollar will still maintain a range-bound pattern in the short term. The resistance band above 0.6560 and the support line below 0.6540 together define the current trading range. RuohuiIf the price can break through 0.6560 with heavy volume, it may open up room to rise to 0.6580 or even 0.6600. On the contrary, if it falls below the 0.6540 support, it may retest the 0.6532 low and then challenge the 0.6500 psychological mark.
The above content is all about "[XM Foreign Exchange Decision Analysis]: Inflation explodes but no action is taken? Tomorrow's decision of the Reserve Bank of Australia hides a "hawk and dove double kill" trap". It is carefully xmaccount.compiled and edited by the editor of XM Foreign Exchange. I hope it will be helpful to your trading! Thanks for the support!
Due to the author's limited ability and time constraints, some contents in the article still need to be discussed and studied in depth. Therefore, in the future, the author will conduct extended research and discussion on the following issues:
Disclaimers: XM Group only provides execution services and access permissions for online trading platforms, and allows individuals to view and/or use the website or the content provided on the website, but has no intention of making any changes or extensions, nor will it change or extend its services and access permissions. All access and usage permissions will be subject to the following terms and conditions: (i) Terms and conditions; (ii) Risk warning; And (iii) a complete disclaimer. Please note that all information provided on the website is for general informational purposes only. In addition, the content of all XM online trading platforms does not constitute, and cannot be used for any unauthorized financial market trading invitations and/or invitations. Financial market transactions pose significant risks to your investment capital.
All materials published on online trading platforms are only intended for educational/informational purposes and do not include or should be considered for financial, investment tax, or trading related consulting and advice, or transaction price records, or any financial product or non invitation related trading offers or invitations.
All content provided by XM and third-party suppliers on this website, including opinions, news, research, analysis, prices, other information, and third-party website links, remains unchanged and is provided as general market commentary rather than investment advice. All materials published on online trading platforms are only for educational/informational purposes and do not include or should be considered as applicable to financial, investment tax, or trading related advice and recommendations, or transaction price records, or any financial product or non invitation related financial offers or invitations. Please ensure that you have read and fully understood the information on XM's non independent investment research tips and risk warnings. For more details, please click here