The market looks to be a little short AUD at the moment and we are seeing some mild short covering after the RBA statement. Policy is deemed as appropriate and it looks like we may be in for an extended period of rates pause.

The RBA will announce their latest decision on interest rates in about 45 minutes but most focus will be on the subsequent statement and any clues it may give as to future direction.

The RBA are meeting later today and I think we should now start the calls for them to lower rates rather than raise them! The latest PPI and CPI data fell significantly last week and with building approvals falling sharply, the RBA will next be considering cutting rates before they look to raise them again.

(Not to mention the fact that it might also help my AUD short position!)

AUD/USD sits at .9035, up from an early 9010. Talk has a well-known US think tank tipping RBA rate hike next week. Don’t have details, but will be lending the pairing support.

The title is “Some longer-run consequences of the financial crisis“.

Buy the rumour, sell the fact. Aussie traders bought AUD/USD because USD/JPY was going up and were left sitting long after the release of the latest RBA minutes. Nowhere to go except down after that with AUD/USD sliding from .8735 to .8715. Offers above .8750 continue to cap the market.

The AUD/USD has once again bounced off the .8315 level opening up the possibility of a double bottom on the hourly chart. It is currently sitting on hourly resistance at .8375/80 which was yesterdays low. Dealers unanimously expect the RBA to stay on hold but are wary of surprises in the subsequent statement.

The RBA will meet this morning and announce their rate decision later today. They are unanimously expected to leave rates on hold at 4.5% and dealers will be watching for any change in tone or language in the subsequent statement.

The AUD/USD traded in a .8375/.8470 range yesterday and I would expect the Asian market to initially respect this range although we can expect to see stop-losses being triggered on a break of either side.

All 22 economists surveyed by Bloomberg say that the RBA will leave rates on hold at 4.5% for the second consecutive month as worries about global growth continue to increase.

• 4.5% cash rate is ‘normal’
• lending should pick up as year progresses
• net debt of 6% of GDP not a major drawback on economy

The AUD/USD is back towards its earlier lows at .8210.

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