Global macro overview for 05/06/2017:
The situation of the Reserve Bank of Australia ahead of tomorrow's policy decision is quite peculiar. Since the previous meeting in early May, inflows of information have been mixed. On the one hand, housing market data show that the boom is continuing, but the real estate prices in Sydney and Melbourne have started to fall sharply together with the building permits (dropped by 13.9 % m/m). Moreover, the wages dynamics remains poor and investment expectations of companies indicate that the 2017/18 fiscal year plans are below the investment growth of 2016/17. On the other hand, signals from the global economy are still more positive than negative, retail sales are growing up at the start of the second quarter (April 1% m/m), the unemployment rate is falling (5.7%). The economic indicators are still in RBA acceptable range, so the GDP at the level of 3.0% is still possible and a help from the global economic recovery should speed up the process of economic recovery.
In conclusion, the RBA must look at a mixed set of internal and external factors, but ultimately the bank should stick to the strategy seen in the recent months: wait-and-see. The interest rate should remain at 1.5%, and the neutral message in the rate statement may bring some relief to AUD.
Let's now take a look at the AUD/USD technical picture. The price has bounced from the golden channel lower support line and now is rallying from the oversold market conditions towards the next technical resistance at the level of 0.7475. The key technical resistance, however, is at the level of 0.7516, which is a confluence of technical levels and the old trend line.
