RBA is likely to wait and watch for ECB and FED

Reserve Bank of Australia (RBA) will be holding its policy meeting tomorrow and announce the decision at 3:30 GMT.

Speculation has been high over the meeting as some analysts predicting form of rate cut in tomorrow's meeting, if not, then some explicit hint over further easing.

• Latest inflation report showed that RBA's preferred measure of trimmed mean inflation dropped surprisingly to 2.1% in third quarter, lowest in three years, giving RBA ample room to ease policy if it wants to.

• However, third quarter trade report showed that while export price index remained stable, import prices edged up by 1.4% in third quarter. Suffering from lower commodity prices, any further weakness in Aussie might deteriorate terms of trade further.

• Another key concern for RBA has been house price inflation across Australia, especially Sydney.

• However some analysts pointed to recent rise in Mortgage rates to be another reason, why RBA might ease.

RBA is most likely to wait and watch tomorrow, given European Central Bank's recent indication of further easing and FED's indication of a possibility of rate hike in December.

Australian Dollar could rise further. Aussie is currently trading at 0.714 against Dollar.

Technically speaking, Aussie has fallen to rising support line and has made bullish engulfing candle in daily chart.