Looking to the Futures

Aussie Higher Following Hawkish RBA

Key Points

  • Negotiations with Panama’s Commerce Ministry and disruptions in Peru send copper have jolted copper prices above their consolidation of the previous month.  


The Reserve Bank of Australia (RBA) was next-up with its interest rate announcement and as expected, hiked the Official Cash Rate (OCR) by 25 basis points to 3.35% on Tuesday.

Rising inflationary pressures were generally behind the RBA’s decision to continue with interest rate increases, especially with fourth quarter CPI running at a stronger than expected 7.8%.

While it would appear that with inflation running hot, the RBA would continue to be hawkish in the coming months. However, the central bank will have to gauge the effects of higher rates on the country’s mortgage market, as a large volume of fixed rate mortgages are set to expire in 2023, and borrowers will be faced with rates adjusting sharply higher and increasing monthly housing payments.

Increased housing costs may force consumers to significantly cool spending, which if severe enough could send the Australian economy into a recession.

Current estimates are for Australia’s GDP to fall to 1.1% in Q4 2023, which would be down from 2.6% in Q4 2022.

However, the RBA did not signal a pause in its tightening cycle at the February meeting and in fact, appear ready for additional 25 basis point rate hikes at its upcoming March and May meetings in order to curb inflation.

Technicals

Looking at the daily chart for the March 2023 Australian Dollar Futures (ADH23), we notice prices recovered from one-month lows following the RBA interest rate announcement.

While the short-term trend was lower for the Aussie, the mid-term trend positive with prices making a series of higher highs and higher lows since recent lows were made back in mid-October.

The 14-day RSI has retreated from near-overbought readings to a very neutral 48.46 as of this writing.

Chart support is seen at the 50-day moving average (yellow) currently near the 0.6874 area, with resistance found at the recent highs of 0.7169 made on February 2.

ADH23 Chart

Contract Specifications

March 2023 Australian Dollar (ADH23)

ADH23 Specifications

Trading Calendar

Wholesale Trade: 8:30 a.m. ET

EIA Energy Stocks Report: 8:30 a.m. ET

WASDE Report: 12:00 p.m. ET

 

Read more futures content.

Read more timely content from our other Schwab trading specialists.