Buy AUDNZD | RBA Rates Held Steady at 2.0%

Today’s trade call is to buy AUDNZD at 109.50, or a more aggressive at market. Stops should be placed at 108.66.

The RBA meeting is past and as was expected, rates held steady at 2.0% with the RBA striking a fairly positive tone which should keep the AUD supported vs the NZD going into the RBNZ that is expected to cut further. Market is also reacting positively to a daily confluence of support. Negative risk to the trade would be poor data from China, or continued decline in base metal commodities such as iron ore and copper.

Current Market Sentiment:

During the NY session yesterday, US ISM Non-Manufacturing PMI came in at 56.9, missing estimates of 58. Nevertheless it showed economic activity in the non-manufacturing sector grew in September for the 68th consecutive month. The dollar was largely unaffected in the wake of Friday’s NFP. The greenback traded mixed, falling against commodity currencies and rising against safe-havens. The theme in the market continued to be risk-on as equities rallied on the expectation of a delay to Fed policy tightening.

During Asia we saw Australian Trade Balance print showing the trade deficit expanded to A$3.1b in August from a revised A$2.8 b in July. The AUD saw some initial weakness on the release, however the market was much more interested in RBA rate decision and statement that followed a few hours later. The RBA left rates on hold at 2.0% as was expected, saying it continues to watch economic data to assess the stance of policy. RBA Governor Stevens struck a somewhat optimistic tone saying “available information suggests that moderate expansion in the economy continues. While growth has been somewhat below longer-term averages for some time, it has been accompanied with somewhat stronger growth of employment and a steady rate of unemployment over the past year.”

Asian equities have traded mostly positive lead by strong Japanese markets continuing with the risk-on sentiment so far in the session.

P.S. Coming up today we have German factory orders, and Halifax HPI during London, followed by Trade Balance prints from the U.S. and Canada, the GDT Price Index, and ECB President Draghi speaking later in the day. You can find my weekly Forex news events overview here if you want to learn more about these particular events.

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