Global macro overview for 06/10/2017

Global macro overview for 06/10/2017:

The interest rate cut by the RBA is still on the table. According to the Wall Street Journal article, the Reserve Bank of Australia is still "not completely" ruling out a rate cut if consumption across the economy loses momentum entirely. The Wall Street Journal cites: "A slump in Australian retail sales in July and August is no cause for immediate alarm, but a response to interest rates could be warranted if consumption across the economy loses momentum entirely, according to central bank board member Ian Harper. Harper also pointed to positive economic data out recently, including employment and investment figures, his comments suggest the Reserve Bank of Australia will likely remain cautious for longer-than-expected".

In a situation where central banks have more and more signals of moving away from ultra-loose monetary policy, the RBA stance 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 signs of problems in China will greatly influence the Australian economy and its currency.

Let's now take a look at AUD/USD technical picture at the H4 time frame. After Harper's comments, the market dropped below the technical support at the level of 0.7777 and currently is testing the larget time frame support at the level of 0.7749. The momentum is still pointing downward and in case of an extended drop, the next technical support is seen at the level of 0.7711.

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