Archived IMT (2009.12.01)

RBA PREVIEW (decision due 3:30 GMT): The Reserve Bank of Australia led the industrialized world in raising rates by hiking in October and November. We agree with the market consensus expecting the RBA to raise rates by 25 bps to 3.75%. Not only have RBA members spoken recently in favour of further moving away from emergency-low interest rates and pre-empting bubbles, but the RBAs next meeting wont be until February 2nd. Had US stocks fallen by say 2-3% on Monday in reaction to the Dubai fallout, the RBA would have had to think twice. But considering the ongoing strength in the Australian housing market, the RBA is expected to hike. We expect the AUSSIE REACTION to be more significant on the downside (in the unlikely event of a rate hold, than on the upside in the likely event of a rate hike. The AUDUSD DAILY CHART has broken the March 2009 trend line support last week, making 0.9240-45 a new resistance. AUDJPY may rally back towards 80.60 resistance in event of a rate hike at which point key resistance emerges.