ALIBABA: unclear future
On Wednesday, at 14:30 GMT+3 Alibaba reports its quarterly earnings. Will they push the stock?
AUD: RBA meeting is eyed
Information is not investment advice
What to expect? No changes, all attention to projections
The central bank is expected to keep its interest rate at 0.10% on Tuesday during RBA’s first meeting of the year. It’s worth mentioning that it’s already halfway through a six-month, $76.6 billion bond-buying program.
Australia has been showing a sustainable pace of recovery so far as recent data has been mostly better than expected. The labor market is rebounding and consumer sentiment is firming. Moreover, Australia was lucky to have China as its neighbor since China was the first country that got out of the Covid-19 crisis and returned to its pre-pandemic levels. Australian-Chinese close trade relationship will boost Australian GDP.
Therefore, analysts consider that the Reserve Bank of Australia may soon taper bond purchases. And if this really happens, the AUD will rise. For now, it’s too early to start lowering the QE program, but policymakers can give their projections of further actions. Investors will closely watch them.
Tug of war between house prices and exchange rate
But it’s not that simple as Australia is a relatively small figure in the world’s monetary marketplace, which means that if it’s first to taper bond-buying, it will risk a severe hit to exporters and jobs.
In other words, nor the USA neither Europe are nowhere close to ending its massive support for the economy. And if Australia decides to do the first move, the AUD will surge and Australia will lose its competitive advantage since its goods will be more expensive for buyers outside of it.
How to trade after RBA’s statement?
- RBA’s projections to lower bond-buying in combination with the positive tone of the speech will drive the AUD upwards.
- On the flip side, no changes, and the negative tone of the speech will press the AUD downwards.
Technical tips
The weak performance of stocks pressed AUD/USD to a fresh 2021 low. However, AUD/USD has bounced off the lower trend line of the Bollinger Bands indicator near the 0.7600 mark. Since the downside is limited by the 50-day moving average of 0.7580, we would expect AUD/USD to rise further up. The breakout above the high of January 28 at 0.7700 will drive the aussie up to the high of January 26 at 0.7750. In the opposite scenario, the move below the support of 0.7580 will drag the pair to the psychological mark of 0.7500.
Kseniya Medik
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