Immediately after the Reserve Bank of Australia announced its monetary policy decision, the AUDUSD tumbled and held on to its sharp losses to currently trade around the 0.6630 handle. The Australian dollar came under intense selling pressure after the Central Bank decided to keep its target for the official cash rate (OCR) at 4.10% at its Board of Governors meeting on Tuesday. However, they did mention that further tightening may still be required to bring inflation back to target.
"Some further tightening of monetary policy may be required to ensure that inflation returns to target in a reasonable timeframe, but that will depend upon the data and the evolving assessment of risks,” - the RBA said.
RBA governor Phil Lowe said the bank would be closely monitoring developments in the global economy, trends in household spending, the outlook for inflation and the labour market ahead of the board’s meeting in September. The latest economic data showed that the Inflation in Australia slowed to 6% in the second quarter, down from 7% in the first quarter.
US stock futures started the fresh month of trading slightly lower. The recent rally paused after the latest strong US economic data fueled expectations the Federal Reserve would maintain its path of interest rate hikes to combat inflation. However, investors should wait for the result of the US employment on Friday to get a clear picture of the market's long-term direction.
On the earnings front, Starbucks, Uber, Pfizer and Pinterest are amongst those reporting the last quarter's financial results today.
Crude oil futures were mostly steady so far today after reaching the highest levels in three months as the prospect of tighter global supply continued to lift oil prices. The key data for the oil prices this week will once again be the weekly crude inventory report, movement of the US dollar and employment data from the US.
In the currency market, EURUSD remains under pressure despite the release of a better-than-expected German employment report. The currency pair turned under pressure after the statistical office revealed that the Eurozone inflation slowed for the third straight month in July, but the inflation rate remains well above the 2% target set by the European Central Bank (ECB). Meantime, the US dollar index (DXY) started the new month on a bullish note as strong US economic data stoked fears that the Federal Reserve could tighten policy further.
The precious metal trading marginally lower on Tuesday and the upside pressure clearly weakened amid a solid ceiling in place. The metal retreats back to below 1955 from the previous session highs. The bearish sentiment was fueled by hawkish remarks from Federal Reserve Bank of Chicago President Austan Goolsbee. Moving ahead to the North American session, the gold traders should closely monitor the release of the ISM Manufacturing PMI for July and the US February JOLTS job openings report.
On the data front, the euro zone's annual inflation rate continued to fall in July, falling to 5.3% after 5.5% in June and 6.1% in May. However, core inflation, which excludes volatile prices for goods like energy, remained unchanged at 5.5 percent. Eurozone's Gross domestic product registered a sequential growth of 0.3 percent after remaining unchanged in the first quarter. GDP was forecast to advance 0.2 percent.
Moving ahead today, the important events to watch:
US – ISM manufacturing PMI: GMT – 14:00
US – JOLTS job openings: GMT – 14:00
Technical Outlook and Review
EURUSD: For the euro, immediate support remains below 1.0970. In case it breaks and closes below this level, it will head towards the next support level which is located near 1.0940. On the upside, 1.1020 will act as an immediate and strong hurdle while 1.1050 will be a critical resistance zone because, above this, bulls are likely to dominate.
The important levels to watch for today: Support- 1.0930 and 1.0900 Resistance- 1.1010 and 1.1040.
GOLD: Gold price needs to stay above 1960; otherwise. 1945 and 1940 may be visible soon. On the upper side, if the metal breaks and closes above 1965 again then the next resistance area to watch is around 1974/75.
The important levels to watch for today: Support- 1950 and 1945 Resistance- 1965 and 1974.
Quote of the day – “The biggest mistake investors make is to believe that what happened in the recent past is likely to persist. They assume that something that was a good investment in the recent past is still a good investment.” - Ray Dalio.