Weekly Outlook: Aussie Market Looks To Upbeat Expectations For Upcoming RBA Decision

Price action has stayed relatively range bound for the Australian dollar during the course of the week even following an optimistic leading index report by Westpac in the previous week.

Especially narrow, the range is being kept at a 75 basis point spread between 0.7575 and 0.7500 as traders continue to search for directional bias as implied volatility in the markets have tuned down, even below levels seen in the summer quarter.  Ultimately, with price action still in consolidation, a likely breakout scenario should be ascertained once the psychological barriers are broken.

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This weeks data should spur the impetus to break above resistance with key reports expected to be highly influential in the upcoming Reserve Bank of <?xml:namespace prefix = st1 ns = "urn:schemas-microsoft-com:office:smarttags" />Australia decision.  First up will be the Conference Boards version of the leading index report.  Taken for the month of July, the leading index report is expected to rise in line with the 0.8 percent increase witnessed on the Westpac survey.  Usually a compendium of already released reports, the survey should be reflective of the above positive reports that have been released in the past couple of months, with emphasis on the consumer sentiment, retail and equity benchmark data.  The results would feed nicely into the TD Securities Inflationary figures for the month of September.  Expected to be in line with the previous increase of 0.6 percent, the report would further foster speculation of increasing interest rates as central bankers continue to emphasize inflationary controls.  Attributed to the increase in prices were higher prices last month in consumer goods, including fruits and vegetables.  Financial services, travels and rent and accommodations were other items that boosted prices at the consumer level in the previous month.  Finally, aside from private sector credit figures, the market will be emphasizing focus on the job vacancies figures.  Previously thought to have pulled back slightly, the nations employment prospects will likely have gotten a second wind according o the August figure as positions are continually being filled.  Expected by the consensus is a decline to 2.5 percent in job vacancies, following a 7.3 percent increase in unemployment prospects in the month prior.  However, the flipside stands that employers may be pulling back bids for new positions on slightly waning labor demand.

Comparatively, the previous weeks data was pretty much a non-factor as key reports were relatively nonexistent on the week.  However, offering Aussie bulls continued optimism was the Westpac MI July leading index, which rose 0.8 percent in the month.  As mentioned before, with the survey standing as a simple amalgamation of previously released indicators, the report seems reflective of positive reports the markets have seen over the last several months.  The report was followed up by a continually and positively suggestive survey on the health of the overall labor force.  Dropping by 0.1 percent in the month of September, the skilled vacancies report was revised slightly higher to a decline of 1 percent in the previous month as companies continue to demand skilled labor.  Comparative to both reports, there was some pessimism in the market following a weaker than expeted new motor vehicle sales figure.  For August, the headline monthly figure dipped 2.3 percent against positive gains of 2.6 seen in the previous month.  Annualized, the figure plunged to 5.6 percent, subsequent to a more mild dip of 1.7 percent.  However, the disappointment was quickly capped as the new homes sales report indicated an increase in the August figure.  New home sales jumped in line with the booming environment currently underway in Western Australia and Queensland.  According to the Housing Industry Association, sales increased by 2 percent, the first increase in four months.

Economic Releases for September 25 September 30