RBA decision tomorrow

The RBA’s interest rate decision is set to be released during tomorrow’s Asian session. The bank is currently anticipated to hike rates.

MORNING OVERVIEW

The RBA’s interest rate decision is to take place during tomorrow’s Asian session, which could lead to heightened volatility in the Aussie from today, as traders prepare for the bank’s decision. For today however, we’re focusing on the release of the US ISM Manufacturing PMI figures for October. Lastly, from a political level we must note that the US Mid-Terms are set to take place tomorrow.

MARKET SNAPSHOT

KEY MARKET THEMES

01 — RBA to hike by 25 basis points tomorrow

The RBA’s interest rate decision is set to take place during tomorrow’s Asian session. The bank is widely expected to hike rates by 25 basis points with AUD OIS currently implying an 86.76% probability for such a scenario to materialize. In turn, traders may be preparing for the bank’s decision from today, which could lead to volatility in the Aussie. Furthermore, with the expectation for the bank to hike rates being so high at this point, we would look towards the bank’s accompanying statement and in particular we would focus on any discussions regarding the inflationary risks as a result of persistently high energy prices. Overall, a hawkish rhetoric could support the Aussie and vice versa.

Market implication (AUD): Bullish

02 — US ISM PMI figure due out today

The US ISM manufacturing PMI figure for October is set to be released during today’s American trading session. The figure is expected to remain steady, which in turn could weigh on the greenback, yet a figure higher than 54.5 could provide support for the dollar. Whereas, a lower figure could weigh on the dollar.

Market implication (EUR): Bearish

03 — US Mid-Terms tomorrow

The US Mid-Terms are set to take place tomorrow. Depending on the outcome, we may see a shift in power within the House of Representatives and in the Senate, which could hinder the Government’s fiscal policy ambitions. In turn, depending on the outcome, the greenback may be influenced.

Market implication (N/A): N/A

WHAT MATTERS TOMORROW

RBA decision tomorrow

Time GMT+2): 05:30

Expected: 4.85%
Previous: 4.60%

Potential market reaction:
Could support AUD

ASSET FOCUS

[EURO, US DOLLAR]

EUR/USD appears to be moving in an upwards fashion. We opt for a bullish outlook for the pair and supporting our case is the RSI and MACD indicators below our chart which tend to imply a bullish market sentiment. For our bullish outlook to be maintained, we would require a clear break above our 1.1245 (R1) resistance line with the next possible target for the bulls being our 1.1310 (R2) resistance line. On the other hand, for a sideways bias we would we would require the pair to remain confined between our 1.1185 (S1) support level and our 1.1245 (R1) resistance line. Lastly, for a bearish outlook we would require a clear break below our 1.1185 (S1) support level, with the next possible target for the bears being our 1.1120 (S2)

KEY LEVELS

• Resistance (R1): 1.1245
• Resistance (R2): 1.1310
• Support (S1): 1.1185
• Support (S2): 1.1120

Technical View: Bullish

CROSS-ASSET VIEW

TRADING SPHERE VIEW

Bullish for OIL

Our base case:
We wouldn’t be surprised to see oil prices moving higher this week, considering the possible strikes on Iran by the US next which have been floating around for a few days.In addition US oil executives from Chevron and Exxon Mobil have cancelled their trips to the Middle East next week, which tends to beg the question as to their reasoning behind such a decision.

What would change our view:
No strikes on Iran next week

RISKS TO THE VIEW

Unexpected events

Changing of the balance of power in Congress

TODAY’s WATCHLIST

01 US ISM PMI figures

DISCLAIMER: This information is not considered as investment advice or an investment recommendation, but is instead a marketing communication.