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Forex Flash: Look to sell Aussie on any bounce after RBA Rate Decision – NAB

FXstreet.com (Barcelona) - The Australian dollar is trading slightly lower to start the week, down 24 pips at 1.0284. The pair had initially traded as high as 1.0308 earlier in the session, but has been drifting lower after the release of AUD Retail Sales which came in at -0.4% actual vs. 0.2% expected. All eyes will be on the upcoming RBA Rate decision, due out on May 7th at 4:30GMT.

According to analysts at NAB Global Markets, “Currency markets will be on tenterhooks for the RBA’s policy decision on Tuesday, with a cut probably worth 50 points to the downside on AUD/USD and no change the same on the upside. In the case of the latter though, gains should be tempered if the accompanying statement makes clear that the easing bias that looked to be held only weakly in April has been strengthened to the point where a June cut now looks more likely than not in the absence of a clear improvement in the data flow in the intervening period.”

Furthermore they added, “If instead the statement reveals no more inclination to cut that was the case in April, then knee-jerk reaction should be sustained, pushing the currency back even more firmly into the 1.02-1.06 range effective range. NAB’s view is that incoming Australian economic data – relating to the housing sector in particular - together with the apparent deterioration in the global demand backdrop, justifies additional easing, but we are not convinced the RBA will yet see things the same way, having throttled back on its easing bias just four weeks ago.”

On a final note they commented, “As such we do not want to be short AUD into the RBA, hence our decision on Friday to take profit on our short AUD/NZD trade recommendation (see NZD section on p.3). We have nevertheless held on to our recently established AUD/CAD short into the RBA. We will look to take advantage of any significant bounce in AUD in the event of an RBA ‘no change’ as an opportunity to re-set AUD shorts, versus the NZD in particular.”

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