Cable Bounces, RBA Up Next

Stock market and cable bulls breathed a sign of relief on Monday as both retraced a portion of the recent declines. The Australian dollar was the top performer on position squaring ahead of today's RBA decision while the Swiss franc lagged.  

Relentless selling pressure in cable abated on Monday and the pair bounced 40 pips to 1.6860. Coming into the day, cable had fallen in 12 of the previous 13 sessions and on Friday it fell below the 100-day moving average for the first time in a nearly a year. Monday's bounce is so far little more than a re-test of that key level but it bears watching.

USD/JPY pushed to the downside in early trading as Treasury yields continued to slide. We note that seasonals are negative for USD/JPY in the Aug-Nov period. Ashraf wrote his latest thoughts on the pair earlier today.

The main theme in US trading was the stock market providing a lift for risk assets more broadly. The S&P 500 bounced 14 points after falling by as many as 75 points over the past two weeks. That helped the Australian dollar about 20 pips higher to 0.9330 ahead of the RBA decision.

Expectations are low Stevens delivers his statement at 0430 GMT. The market might have expected a more dovish bent until the Q2 CPI showed some inflation pressures. The OIS market is pricing no chance of a move and no moves in the year ahead.

Any AUD/USD move might come from Stevens' jawbone as he works to push the Aussie lower after it hit a two-month low on Friday.