The Australian Dollar found temporary support in the RBA announcement that no major changes in inflation and growth forecasts were made. Especially the latter was reassuring in the face of recent disappointing CPI data. But the bank maintained optimism about growth with signs of slowing consumption (a drop in retail sales of 0.6% since August) and low wage pressure. In the statement, RBA Governor Phillip Lowe said: "Conditions in the global economy are continuing to improve. Labour markets have tightened and further above-trend growth is expected in a number of advanced economies, although uncertainties remain. The Bank's forecasts for growth in the Australian economy are largely unchanged. The central forecast is for GDP growth to pick up and to average around 3.0% over the next few years. Business conditions are positive and capacity utilization has increased".
In conclusion, there was nothing new in the RBA statemnet as many of the remarks were reiterated. Nevertheless, despite a lack of a hike this time, tougher lending conditions have arguably had a similar effect as a lift in the cash rate, except the effect is more focused on slowing investment activity across the housing sector. Moreover, house price data for October showed Sydney home values continued to a slide in October, with the nation's biggest housing market recording its first quarterly fall in prices since May 2016.
Let's now take a look at the AUD/USD technical picture at the H4 time frame after the news was released. The market tried to rally higher after the data, but it was capped at the level of 0.7700. Only a good attitude of copper and iron ore (under the influence of oil rally) inhibits the decline of AUD, but the macro background supports the view of continuation of the downtrend. The next immediate support is seen at the level of 0.7625.
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