Forex Analytics from LiteForex of 03.11.10: AUD: Australian Dollar can be on sale

At the Forex currency market the Australian Dollar rate goes down slightly today repeating general dynamics of the market in advance of the U.S. Federal Reserve announcement on Wednesday night.

Forex forecast: MACD indicator is in the positive area for the pair AUD/USD, however it goes down giving grounds for a pair sell signal. Stochastic Oscillator is giving a similar signal today, being outside of the overbought zone.

Forex recommendations: in case of breakdown at the level of 0.9950 traders’ targets will be the levels of   0.9910 and 0.9850.

The following Australian data was released today:
– Total construction permits in September:-6.6% m/m against previous:-4.8% m/m, changes had not been expected;
– Business activity index in the service sector AiG in October: 50.7 against 45.6 previously.
The main event of Tuesday – the decision of the Reserve Bank of Australia to raise interest rate to 4.75% per annum from the previous level of 4.50% (+25 basis points) which was a surprise to the market – however expectations of the U.S. Federal reserve decisions which will be known tonight are in the forefront today.

Regulator noted in the comments yesterday that country’s economy is vulnerable to external influence and has too little spare capacity. The risks of inflation still remain and it will make sense to proceed with policy tightening more actively.

According to International Monetary Fund, the Reserve Bank of Australian shall raise interest rates as the inflation should be chilled out and the outlook risks should be reduced. As the IMF report stated regulator agreed that if the downside risks weaken, the policy of the rates will dictate their growth.

IMF believes that the Australian economy looks quite strong due to the demand in iron ore from China. The IMF report also stressed that the AUD rate seems overrated by 5-15%.
Worth noting that the RBA expects that inflation will remain in the target range and reach the level of 2.75% by the end of the year. By the end of 2012 the Bank expects inflation to be close to 3%.

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