Global macro overview for 17/05/2016:
The Reserve Bank of Australia's Monetary Policy Meeting Minutes have been released overnight. The RBA has expressed concerns in two main fields of the Australian economy: inflation and unemployment. According to the minutes from its May meeting, where the cash rate was cut to 1.75%, the RBA was worried about ongoing inflation trends as the recent reading was way below the RBA's projections. This means the Australian economy might be edging towards the deflationary territory as the data cannot be explained entirely by temporary factors. The second RBA concern is the slowing employment growth in the first quarter of 2016. The current unemployment rate is at the level of 5.7%, but the low wage growth is supporting the job insecurity as well. In conclusion, economists are now betting the RBA will continue to cut the cash rate after being surprised by the depth of the latest inflation reading. For example, the Commonwealth Bank is predicting two more cuts in 2016 taking the cash rate to 1.25%, with some other large institutions such as JP Morgan forecasting the cash rate at 1% or lower.
Let's now take a look at the AUD/USD technical picture on the daily timeframe. After the breakout below the brown trendline, the bears have managed to push the price below 50% Fibo and it looks like the next important technical support at the level of 0.7212 might be tested soon as well. Please note that the current technical resistance at the level of 0.7382 is the key level to the upside.
