In a decision widely expected by the market, Australia’s central bank, the Reserve Bank of Australia (RBA), maintained the country’s interest rate at its record low of 1.5% today.
In an accompanying statement, the RBA’s Governor, Philip Lowe, said that “annualized GDP growth is expected to have slowed in the March quarter,” but that “growth is still expected to increase gradually over the next couple of years to a little above 3%.” The Australian Bureau of Statistics releases its latest GDP data on Wednesday, June 7th.
The Governor noted that weak wage growth in Australia – a persistent problem for the country – would continue for the foreseeable future and curb consumption.
Ahead of today’s meeting, the economic outlook for Australia had been deteriorating following patchy economic data and tumbling iron ore prices. The outlook had deteriorated so much that traders had begun making bets on a rate cut by the RBA sometime this year.
Although the probability of a cut remains low (roughly 20% according to prices in derivatives markets) Australia has joined Switzerland as one of only two advanced economies for which a rate cut is considered a possibility in 2017.
An hour after the RBA decision, the Australian dollar had climbed by roughly 0.2% against the US dollar to 0.7492 and had posted a similar gain against the New Zealand dollar, against which it now stands at 1.0460.
It’s Decision Time for the Philippine Peso
The USD/PHP exchange rate fell yesterday to as low as 49.29, and in doing so the peso reached a 7-week high. More importantly, however, is the crucial position that USD/PHP now takes up relative to its recent price history.
The USD/PHP rate has spent months building a topping pattern that will be easily recognizable to technical traders as a Head and Shoulders pattern. Interested readers can click the chart image below to view the pattern in a larger size.
As of yesterday, USD/PHP sits right on the pattern’s ‘neckline’ (the yellow line spanning price troughs in January and April), a break of which should indicate significantly lower prices ahead (significant peso strength). In fact, the traditional price objective of a Head and Shoulders pattern would put the exchange rate target close to 48.0 – a level not seen since October of last year.
While many Head and Shoulders patterns fail to predict future market direction in the way described by technical analysis enthusiasts, the ‘textbook’ nature of this one suggests it is more likely to work and is more significant than other patterns of this type seen recently in popular FX pairs.
Readers who would like to get their hands on Philippine pesos now, ahead of a break in the neckline and subsequent increase in the peso’s value, can use BestExchangeRates.com’s FX comparison calculators for PHP travel money and PHP foreign currency transfers to find exchange rates better than those available at your local bank or Bureau de Change. Additionally, business owners who might be negatively impacted by an increase in the peso can read our guides to managing foreign exchange risk.
It is, however, important to bear in mind that the neckline is not yet broken. In the short-term, the pattern’s neckline may in fact act as a price support, as was the case yesterday, and could prompt a minor rally in USD/PHP.
Whether the peso is set to move up or down, this is one of the most interesting technical patterns we’ve seen in FX markets in recent months and is worth watching closely.
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