AUD/USD: Upside risk on RBA’s hold - ING

Analysts at ING see risk in AUD/USD tilted to the upside for next week and consider it could trade between 0.6850 and 0.7000. Their one-month target is 0.6750. 

Key Quotes: 

“The Australian dollar has staged consistent gains this week, taking advantage of stable risk appetite and an encouraging inflation read, that allayed the lingering doubts on whether the RBA will keep rates on hold next week. The market is now pricing in only a 6% probability of a cut next Tuesday, so most of the reaction will likely be driven by the Bank’s forward-looking language. Our base case is that the RBA will refrain from any more cuts at least through the end of 2019, so we would not be surprised to see Governor Lowe providing some indications of a more extended pause in the easing cycle. Alternatively, he may well err on the side of caution and keep the door open for more cuts, whilst expecting developments in the inflation and employment spheres as well as on the global trade backdrop.”

“We think that a further stabilisation in risk sentiment and the possibility of a hawkish shift  by the RBA suggests that the balance is skewed to the upside for AUD/USD in the next week. The 200d MA at 0.6955 should, however, prove to be a fairly solid resistance to AUD rallies for now.”