The Reserve Bank of Australia raised its cash rate by 25 basis points to 4.60%overnight. The decision was unanimous. The RBA said some upside risks to inflation are materializing, with higher energy costs and domestic price pressures among its concerns. It left the door open to another hike if needed, while emphasizing that future decisions will depend on the data and evolving outlook. Read the InvestingLive report on the decision here.www.rba.gov.au
The Australian dollar has nevertheless moved lower. In the latest supplied FX snapshot, AUDUSD is near 0.6999, down 0.21%, making it the weakest of the major currencies against the U.S. dollar. That is an important distinction for traders: the RBA raised rates, but price action is telling us that buyers have not taken control of the currency. The decision was expected, and traders are now weighing the prospects for additionaltightening.
The dollar is higher against six of the sevenmajor currencies. NZDUSD is down 0.19% near 0.5653, EURUSD is down 0.18% near 1.1349, and GBPUSD is down 0.10% near 1.3239. The dollar is also higher against the Swiss franc and Canadian dollar. The yen is the exception: USDJPY is down 0.08% near 157.22.
The EURUSD moved lower from the start of the Asian Pacific session but after reaching the most recent swing low area from June, the buyers leaned and pushed the price back to the upside. The 100 hour MA (blue line on the chart below), remains a key target that needs to be broken and stay broken to increase the bullish bias. In the video above, I talk to that dynamic as well as the technicals for the USDJPY and the GBPUSD.
In the Middle East
Diplomatic efforts between the U.S. and Iran remain active, but a deal to reopen the Strait of Hormuz is still uncertain. Iranian Foreign Minister Abbas Araqchi said Tehran discussed new ideas with Qatari mediators and expects a U.S. response through Qatar. Iran continues to tie any reopening of the strait to its conditions. President Trump, meanwhile, denied reports that he had offered sanctions relief or access to frozen Iranian funds. InvestingLive has more on the mediation and Trump’s denial. investinglive.com
For traders, the next U.S. response is the key headline risk. Progress toward reopening Hormuz could ease supply concerns and weigh on oil; another impasse could restore the risk premium. In the 7:50 a.m. ET snapshot, crude was down 0.68% near $91.97. That decline shows why it is important to watch what oil does after each diplomatic headline, rather than assume talks have produced a breakthrough.
U.S. Treasury yields have eased in the updated snapshot:
- 2-year: 4.9097%, down 1.43 basis points
- 5-year: 5.050%, down 2.00 basis points
- 10-year: 5.2131%, down 2.89 basis points
- 30-year: 5.5398%, down 2.22 basis points
US stock futures are implying higher open after the declines yesterday:
- Dow up 113 points
- S&P up 21 points
- Nasdaq 100 +130 points
Yesterday, the Nasdaq 100 fell -1.08% while the S&P fell -0.77%.
European stocks are higher today as well:
- Germany’s DAX: +0.92%
- France’s CAC 40: +0.30%
- UK’s FTSE 100: +0.35%
- Italy’s FTSE MIB: +0.94%
In commodities, crude oil is down 0.68% near $91.97. Gold is up 1.00% near $4,154, and silver is up 0.62% near $60.98. Bitcoin is up 1.10% near $84,382.
What is on the North American calendar?
The data and Fed speakers give traders several opportunities to reassess the dollar’s early gains:
- 8:30 a.m. ET:Canada’s July monthly GDP. The calendar shows a 0.0% forecastafter 0.3% previously.
- 9:00 a.m. ET:U.S. home-price reports, including the Case-Shiller 20-city index.
- 10:00 a.m. ET:September U.S. consumer confidence, with a 89.2 forecastversus 89.4 previously.
- 10:00 a.m. ET:August JOLTS job openings, with a 7.225 million forecastversus 7.271 million previously. The report will give traders another look at labor demand ahead of Friday’s employment report.
The Fed calendar is also crowded. Michelle Bowman, a Fed governor, is scheduled to give opening remarks at 11:00 a.m. ET. Michael Barr, a Fed governor, is due at noon; Austan Goolsbee, Chicago Fed president, at 1:00 p.m.; Alberto Musalem, St. Louis Fed president, at 1:30 p.m.; John Williams, New York Fed president, at 2:00 p.m.; and Christopher Waller, a Fed governor, at 3:00 p.m. Waller’s scheduled topic is payments, so monetary-policy comments from him are less certain.
For traders, the sequence matters. A surprise in job openings or confidence can move yields and the dollar first. Fed officials then have several chances to respond to the broader inflation and employment outlook. Prepare the levels before those events: a headline may start a move, but whether price stays beyond a technical level will tell us more about who is taking control.
In the Kickstart video above, I take a look at the three major currency pairs—EURUSD, USDJPY and GBPUSD—from a technical perspective. For each pair, I outline the bias, the risk-defining levels and the targets that would give either the buyers or sellers more control.
This article was written by Greg Michalowski at investinglive.com.