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Daily Report: Aussie Jumps on Unexpected RBA HikeAussie jumps across the board after RBA surprisingly raised the cash rate by +25 bps to 4.75%. At the accompanying statement, RBA said that the Australian economy has been growing around trend over the past year. The labor market has been firm and 'further strengthening would appear to be in prospect, judging by the trends in job vacancies'. 'The economy is now subject to a large expansionary shock from the high terms of trade and has relatively modest amounts of spare capacity' and ' the risk of inflation rising again over the medium term remains'. Therefore, the balance of risks had shifted to the point where 'an early, modest tightening of monetary policy was prudent'. |
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| Featured Technical Report | |
AUD/USD Daily OutlookDaily Pivots: (S1) 0.9817; (P) 0.9865; (R1) 0.9918; More AUD/USD rises to as high as 0.9993 today so far and the break of 0.9973 resistance auges that recent up trend is resuming. Intraday bias will remain on the upside as long as 0.9832 minor support holds. Sustained break of parity will confirm up trend resumption and should target 61.8% projection of 0.6008 to 0.9404 from 0.8066 at 1.0165 next. On the downside, though, below 0.9832 will minor support will turn intraday bias neutral again and bring more consolidations first. |
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RBA Unexpectedly Raises Cash Rate to 4.75%The RBA surprisingly raised the cash rate by +25 bps to 4.75%. While we had expected one more rate hike will be seen in the fourth quarter, we forecast it would be in December. The central bank hike the policy rate, despite weaker-than-expected inflation in 3Q10, stagnant business credit, strength in AUD and potential QE2 from the Fed, amid anticipation that inflation will accelerate in the medium-term as driven by rallies in commodity prices and tightening job market. With this hike, we believe the RBA is done for the year and is likely to leave rates unchanged until 2011. Fed to Spark QE2, What Options Does it Have?The Fed is almost certain to announce QE2 at the November FOMC meeting. Indeed, comments from Fed officials in recent weeks have indicated further accommodations are required to bring inflation and employment back to levels the FOMC sees as consistent with its dual mandate. We expect policymakers are inclined to a more gradual approach of monetary easing, i.e. to purchase long-term Treasury securities of around $100B per month, without upper limit on the total amount and being reviewed on every FOMC meeting. At the same time, the Fed may modify the language used in the accompanying statement as Chairman Ben Bernanke said at the Boston Fed conference that he would examine ways to achieve greater easing through a new communication strategy. |
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| Candlesticks and Ichimoku Intraday Trade Ideas | |||||||||||||||||||||||||||||||||||||||||||||||||||||
Trade Idea: USD/CHF – Buy at 0.9870Despite yesterday's rally to 0.9972, as the greenback has retreated from there, suggesting consolidation with mild downside bias would be seen and below the Kijun-Sen (now at 0.9893) would bring minor correction to 0.9870 but reckon the Ichimoku cloud (now at 0.9854-58) would contain pullback and bring another rise later. Trade Idea: EUR/USD – Buy at 1.3890Despite yesterday's retreat from 1.4012 to 1.3864, as the single currency has rebounded, consolidation with upside bias is seen, however, break of said resistance is needed to signal the rise from 1.3734 is still in progress and extend gain to 1.4050/55, however, reckon price would falter below previous resistance at 1.4080 and choppy trading would continue. Candlesticks Intraday Trade Ideas Update Schedule (GMT): Elliott Wave Daily Trade Ideas Update Schedule (GMT): | |||||||||||||||||||||||||||||||||||||||||||||||||||||
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