Global macro overview for 03/10/2017

Global macro overview for 03/10/2017:

The Reserve Bank of Australia has left the interest rate unchanged at the level of 1.50% as expected. In the Rate Statement, RBA Governor Philip Lowe reiterated the pattern from a month ago. Minor changes related to the assessment of economic prospects based on improvement in investments were mentioned. As for the Australian Dollar, Lowe reiterated that the appreciation in the mid-year was on the prospects for inflation and growth. What caught the attention was the fragmentation of the macro-prudential oversight of the real estate market in order to prevent the imbalances. In the past, the RBA wanted to curb the demand for mortgage loans without rising interest rates. So now it seems that the RBA is not keen to change its attitude toward interest rates.

In a situation where central banks have more and more signals of moving away from ultra-loose monetary policy, the RBA position may be a ballast for the AUD. The Australian economic growth is still closely tied to the Chinese economy, which is being supported by increased spending on infrastructure and property construction, with the high level of debt continuing to present a medium-term risk. Any sign of problems in China will greatly influence the Australian economy and its currency.

Let's now take a look at the AUD/USD technical picture on the H4 time frame. The bear has managed to break out below the technical support at the level of 0.7807, but it looks like the move down is losing the momentum. There is a visible bullish divergence between the price and the momentum indicator, so the market reaction might be a bounce towards the nearest technical resistance at the level of 0.7867.

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