RBA Keeps Policy Steady as Expected

The Reserve Bank of Australia (RBA) at its February monetary policy meeting left the official cash rate unchanged at a record low of 1.50% for the 27th straight meeting, thus supporting Australian shares which ended 1.9 percent higher at 6,005 following gains from financials, marking the best gains of the year for Aussie stocks. Indices in Japan finished 0.19 percent lower at 20,844. U.S. crude oil gained 25 cents to $54.81/barrel. Brent crude also added 25 cents to $62.76/barrel. The dollar index is adding 0.11 percent to 95.94.

Risk sentiment remains muted in European markets as they continue to search for direction, DAX started with mild gains adding 0.30 percent to 11,220 as CAC40 is trading 0.26 percent higher at 5,013 and FTSE100 in London edges up 0.63% at 7,079.

On the Lookout: The RBA decided to leave the cash rate unchanged at 1.5% and expects GDP growth to average around 3 percent this year, and for 2020 growth to slow due to weaker resource exports, the Household consumption remains a source of uncertainty, as the Central scenario for inflation is 2 percent in 2019, and 2.25 percent in 2020.

In the financial calendar, the final services PMI reports from Eurozone will dominate the common currency events that will be followed by the UK services PMI release at 09:30 GMT. Markets expect the UK services sector activity to ease to 51.0 in January vs. 51.2 previous. At 10:00 GMT, the Eurozone retail sales data will be reported. From the other side of the Atlantic the Canadian trade figures due to be published at 13:30 GMT, followed by the US ISM non-manufacturing and Markit services PMI for the last month.

AUDUSD Hourly (H1) Chart

Trading Perspective: AUDUSD was the outperformer yesterday having initially dropped briefly below the 0.72 figure following a big miss on the Aussie retail sales and international trade data. Later, the bulls took back control after the RBA decision, with a not so dovish tone as widely expected. The Aussie rallied strongly to 0.7265, up 0.50% on the day. Currently, the pair holds the 0.7250 handle after it rejected at the 200-day moving average at 0.7295. Bulls are in control for the short-term period with immediate support at 0.7210 the lows from yesterday session and then at 0.7138 weekly low. On the upside, strong resistance will be met at 0.7295 today’s high which if breached the positive momentum will be enhanced by further buying.

USDJPY: The Bank of Japan Governor Haruhiko Kuroda, speaking at the lower house budget committee said there was no change to the central bank’s assessment of the economy after polling errors forced the labor ministry to revise monthly wages data.

The pair is trading at a 2-month high around 109.85 as the rebound from December low continues. The pair holds the positive momentum as long as it holds in the hourly chart the 200 hours MA, and attempt to break the 110 handle can‘t be ruled out. Immediate resistance is at 110.15 area while the 50-day moving average at 110.83 will provide more supply. On the downside, the 109 level will provide solid support while a break of that line can force the prices down to 108.65.

Gold is trading flat at $1312 with immediate resistance at 1305 the 200 hours moving average followed by the $1300 psychological figure. On the upside, the 100-hour moving average will act as resistance above which the precious metal is likely to target 1321 before an attempt to nine-month high around 1326 level.

XAUUSD Hourly (H1) Chart