RBA rate decision likely to set market tone

7 March, 2017

The Australian dollar has been under a large amount of pressure over the last few days as the markets look to jump out of risk assets and look elsewhere in the market, with many worried that Trump won't follow through with his original promises. Disregarding that economic data has been somewhat flat out of Australia as retail sales m/m came in at 0.4% (0.4% exp), hence why the AUDUSD has found itself under pressure. However the market is poised to move on the back of the Reserve Bank of Australia today, as analysts are expecting the RBA to start signalling its thoughts regarding the next move. Betting on a rate hike is unlikely, it's more the tone that is important regarding there announcement, with many looking to gleam the possibility of a rate rise further in the year from the historic low of 1.50% at present. While global uncertainty is something that is apparent in the wake of Trumps election, the AUD may also see some slight jawboning as the RBA does like to take a swipe when it gets the chance.

Technically speaking the market has acted quite aggressively and the bulls were certainly in control for a bit, but the steep upward trend has taken a back seat in the previous few trading days. With the market poised to look for direction after the RBA announcement volatility is low, but any bullish tone could lead to a jump in the AUDUSD which could push through resistance at 0.7617 and leave the AUDUSD in a position to put further pressure on resistance around 0.7714. Dovish talk could also lead to a drop in the market and could lead to an extension lower to support at 0.7498.

The S&P 500 has been charging up the charts on the back of positive US sentiment and the bullish trend has slowed down after touching the 2400 mark recently. The bulls have looked a little lacklustre in the recent days, but there is still strong sentiment that they can and will drive higher. What will be key though is not US economic data, but instead Trump who has so far used his voice to very strong effect in the markets. There will also be many looking for that silver bullet in the Trump tax plan which has been on the cards for some time, and I would expect to hear some more shakeups in the near future as well for Healthcare as the week rolls on.

For the S&P 500 the bullish channel is quite strong on the daily, while somewhat steep there is a large number of traders looking to see how high it can climb. In addition to this the 20 day moving average has been moving up the charts and will likely act as dynamic support as it has previously done. So far support at 2367 has been strong and any upward momentum is likely to carry on to 2400, but I would be surprised to see it push further through unless we saw some large economic plans come out the Trump administration. Or unless the Fed started to rattle its sabre at the market again. 

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