AUD/USD: RBA's guidance; extension of China truce - OCBC

Australian Dollar (AUD) was a touch firmer this morning amid supported risk sentiment and improvement in business confidence, OCBC's FX analysts Frances Cheung and Christopher Wong note.

Bearish momentum on daily chart fades

"Trump confirmed an extension of trade truce for another 90 days into early Nov. This means tariffs on China imports will stay at 30% while tariffs on US imports will stay at 10%. Meanwhile, Nvidia and AMD have managed to strike a deal with US administration to sell advanced chips to China by agreeing to pay the US government 15% of revenue from the sales."

"That said, AUD's near-term fate still hinges on RBA (policy decision today at 1230pm SGT), AU wage price index (Wednesday), labour market data (Thursday) and USD moves this week. Softer 2Q CPI, PPI and decline in job advertisements had paved the way for RBA to deliver a 25bp cut. For the year remaining, OIS futures pointed to about 60bps cut."

"But it remains uncertain if RBA language will tilt more dovish or if the MPC prefers to stick to current 'cautious and gradual' pace of rate cut. A less dovish or 'no hurry' type of language/ guidance may frustrate AUD bears. AUD was last at 0.6520 levels. Bearish momentum on daily chart faded while RSI rose. Resistance at 0.6550 levels. Support at 0.65, 0.6430 levels."