Bull Flag Confirmed, RBA Up Today

Strong showing from the Aussie dollar Monday, as higher commodity prices and pre-RBA positioning provided support. Purchases into the WMR fix allowed AUD/USD to clear last week's peak ($0.7540) and attack key resistance from Oct 28 high of $0.7556, which held firm for now.

• Yesterday's upswing confirmed a bull flag formation, fixing the technical focus on the topside. Further gains past Jul 6, 2021 high of $0.7599 would please bulls, while bears look for a pullback under Mar 23 low of $0.7450, followed by Mar 22 low of $0.7376. The rate last sits at $0.7546, little changed on the day.
• In the key local risk event today, the RBA will announce its monetary policy decision. The RBA will leave its monetary policy settings unchanged at the end of its April meeting. Focus will quickly move to the Bank’s guidance paragraph, with the board likely to reaffirm that it is “prepared to be patient as it monitors how the various factors affecting inflation in Australia evolve,” even as the strength of the labour market persistently outstrips its expectations. Meanwhile, wider global inflationary pressures are well documented, but the Bank has insisted that the inflation backdrop observed in Australia is “different.” Elsewhere, the Bank identified the Russia-Ukraine conflict as a “a major new source of uncertainty” in March, with a lack of clarity on the matter still evident. We also note that the latest Federal Budget was stimulatory (albeit within the realms of general expectations), with split sell-side views on the level of immediate spill over when it comes to monetary policy. Note that the impending Federal Election (due to take place in May) adds a further layer of complexity on the fiscal front. Market pricing remains much more hawkish than RBA rhetoric (see our full preview here).
• Looking further afield, Australia's monthly trade data will be published on Thursday.