Eyes on Reserve Bank of Australia: How the AUDUSD Would React

The AUDUSD is expected to see a lot of activity from various economic indicators, but chiefly from the Reserve Bank of Australia’s Cash Rate decision. The AUDUSD spent a lot of last week trading range bound as markets have speculated widely that there would be a 25bps rate cut at Tuesday’s RBA meeting.

However, a number of events that may affect the outlook of the AUDUSD will play out in the next few hours. This weekend, a Bloomberg report quoted US White House officials as mulling the idea of limiting portfolio outflows from the US to China.

China has responded to these suggestions in a manner that has been described as “not so negative”. Chinese diplomat Wang Yi says he hopes for a positive outcome from the trade meeting between both countries scheduled for October.

Added to the trade situation is also the Chinese PMI data from Caixin and the NBS, expected early in Monday’s Asian trading session. Data is expected to come in mixed, with Caixin Manufacturing PMI expected to weaken and the NBS PMI expected to improve.

AUDUSD Trade Scenarios

AUDUSD traders would be looking more for the expected trajectory of the RBA in terms of future decisions. These are to come from the RBA statements, as the general consensus is that the RBA would follow through on its latest dovish stance.

However, the Chinese PMI data may be a joker that could turn the tables. If the Chinese PMI data are surprisingly good, this may cause the RBA to hold in Tuesday’s meeting, which would be good for the AUDUSD.

A rate cut on Tuesday, followed by a less than dovish stance from the RBA could lead to demand for AUDUSD, which would shore up prices in the near-term. If the RBA statement opens the door for future easing, this would be dovish for the AUDUSD.

The Chinese PMI data should be the economic indicator to watch, before deciding on the new bias for the AUDUSD.

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