Global macro overview for 05/09/2017

Global macro overview for 05/09/2017:

The Reserve Bank of Australia has left the interest rates unchanged at the level of 1.50% as expected. In the Rate Statement, RBA said that the current monetary policy will be suitable for sustainable growth and inflation's return to the target. The rhetoric against AUD has not been tightened - it was reiterated that the strong AUD was ahead of growth prospects and employment and could be declining price pressures. But there is no sign of dovishness as the condition of the business and the labor market does not require it. On the other hand, loosening would jeopardize the stability of the housing market. Any interest rate hike has been also set aside at least until the second quarter of 2018.

The RBA commentary regarding the Australian Dollar exchange rate was unchanged. This is hardly surprising given that the AUD remains in the range of 0.7900-8000 against the US Dollar. In the statement, the RBA refers to "an appreciating exchange rate would be expected to result in a slower pick-up in economic activity and inflation than currently forecast". This approach is more realistic than attempting to talk down the AUD given that markets are almost certain that the RBA would neither cut rates nor intervene. The message implies that further increases in the exchange rate would threaten growth and inflation. The RBA current forecast for GDP growth in 2017 is 2.5%, lifting to 3.25% in 2018, and 3.5% in 2019. Nevertheless, as noted by the RBA, risks around the consumer activity associated with weak wages growth, ongoing spare capacity in the labour market and high household debt still threaten the current growth momentum.

Let's now take a look at the AUD/USD technical picture on the H4 time frame. The market keeps bouncing from the 38% Fibo support at the level of 0.7876 but is still too weak to break through the technical resistance at the level of 0.7996. The momentum is still above the fifty level, but there are the first signs of a growing bearish divergence.

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