October 4, 2021 15:25:31

We shouldn’t expect any fireworks from the RBA at their overnight meeting, after they effectively froze their policy measures until February next year at the last rendezvous. The cash rate remains at 0.10% and the bank confirmed the reduction in QE to $4bn a week in September.

How quickly actual inflation returns sustainably to the 2-3% target range is the key question. Sharp house price gains amid rapidly expanding mortgage lending points to growing risks. The August jobs report was also noticeably weaker than forecast.

AUD/CAD bearish consolidation on support

AUD weakness has been prominent recently with the downbeat risk mood hampering cyclical currencies. Although this pair edged higher at the start of last month, it failed to get above 0.9431. The long-term downtrend has kicked back in with last week’s low at 0.9143 also being the July low and initial support.

Today’s OPEC+ agreement to stick to the planned output hike of 400k bpd has given CAD a boost. Weakness below this initial level will challenge the August bottom at 0.9110/11. The next mark below here is at the 50% Fib level of the March 2020 / February 2021 high at 0.9029.

AUD/JPY trendline resistance doing its job

This pair is known as the risk barometer. Last month, it staged a mild comeback after dropping below 79. Prices have been trading around the 50-day SMA in recent weeks. But more upside looks tough at the moment as stocks look weak. The bearish trendline from the June highs is also capping a move higher.

Sellers need to break Friday’s low at 79.90 to move towards and below 79. The August low sits at 77.89. If risk sentiment does become more positive, 81.04 is first resistance. This comes ahead of the 100-day SMA and September highs around 82.