By Mihai Faur
Reserve Bank of Australia
This night the Reserve Bank of Australia (RBA) has released their monetary policy quarterly reports. The report released was less dovish than expected and this indicates that the RBA has revised down the outlook for growth rate and inflation for the first half of 2015. However, after the release of the monetary policy statement, the Australian Dollar strengthened as the revised outlook for inflation was within the Bank’s target range of 2%-3% and their expectations were that by the end of the year annual growth rate rise.
Earlier this week, RBA has cut their interest rate by 25 bps. This quarterly statement also included an assessment of the interest cut, which concluded that the cut was necessary in order to support demand and sustain growth and inflation outcomes consistent with the Bank’s target.
Following the release of the monetary policy statement, the AUD/USD has recovered all of its losses incurred by the interest rate cut and as the monetary policy statement was optimistic we can expect AUD/USD to continue its gains until it reaches the major psychological level of 0.8000.
US Non-Farm Payrolls and Unemployment Rate
Despite the release of RBA’s monetary policy statement, the highlight of today is the US non-farm payrolls and Unemployment Rate. Market consensus suggests that today we will see an increase in payrolls of 230k, down from the 252k reading in December. A number higher than 200k today means that the US economy has managed to add at least 200k jobs for 12 consecutive months. The expectations for the Unemployment Rate are to remain unchanged at 5.6%, while the average earnings are expected to grow a bit on a year to year basis. Such reading will be in line with the FOMC’s view on the employment market. In the last FOMC meeting, the committee talked about “strong job gains” and “solid pace” of growth, therefore, another strong reading from the NFP could support the dollar.
The EUR/USD pair currently trades at 1.4452 after it bounced from a near-term downtrend line. The next important resistance is at 1.1540 and next support is 1.1260. A good reading from the Non- Farm Payrolls might move the price back down to challenge the 1.1260 support area or even lower the 1.1100 support area. However, if the readings does not meet the expectations than we might see the price of EUR/USD going above the 1.1540 resistance in order to challenge 1.1650 resistance area.