Going in looking for explicit easing bias

The AUDUSD is down on the day and is trading at the lowest level since April 15. The low came in at 0.7597. The low closing price going back to May 2009 comes in at 0.7984. The low for the year (going back to May 2009) is 0.7532.

When you are within 100 pips of 7 year lows, I guess you can say the market is going into the RBA meeting near lows, and is pricing in bearish news. More specifically an explicit easing bias being put back in the statement.

If you recall after the last easing in May, the RBA took out the the reference to further easing (i.e., "Further easing of policy may be appropriate..."). Those words are what this decision will be ALL about and likely the price action post the decision.

Last week, the price fell on the back on capital expenditure data for the 1Q which showed a -4.4% decline on back of a -1.7% decline in the 4Q. That is not good. Building approvals fell by a greater than expected -4.4% in April (what's with -4.4%). Housing strength has been a concern despite the slowdown in economic activity. As a result, the slowing is probably a welcome thing - although housing still remains a bright spot. Employment, released not long after the last decision slowed after some better data. Iron Ore prices - a proxy for China demand consolidated in May after rising in April. It remains well off levels from 2014.

Since the last meeting the price squeezed up to a high of 0.8162 - helped by overall dollar weakness. Since then, however, the price has closed lower on 12 of the last 13 trading days and in the process shed 565 pips. The decline has been helped by a stronger dollar and some weaker data in Australia as well. Gov. Stevens also jawboned the currency back lower in May. As mentioned earlier, good news is priced in.

What would keep the bearish train rolling down the tracks? Get below the low close for the year at the 0.7584 and stay below that level. Once that is done there is still work to be done with a move below the low price for the year at 0.7532.

What would give the dip buyers joy? Looking at the hourly chart below, there is a nice trend line that connects the May 26 high with the May 28th high. That trend line was tested on 2 separate occasions today and found sellers. At the time of the decision it should probably be around 0.7635. A move above it, would be a chink in the bearish armor. An additional bullish move would be a move above the 100 hour MA (blue line in the chart below). The price has not traded above the 100 hour MA since May 15th (there was a nice test and hold on May 22). That MA will likely be at 0.7667 around the time of the release.

On no explicit easing bias, those levels should be taken out and then used as support by traders. We would likely look to test 0.7719-37 and then the 200 hour MA and 50% retracement area at the 0.7764 area. That area would be tough to break on a first look.

If the explicit easing is put back in, the lows from this year will be eyed. A break of the low will next look for a move below the 0.7500 level.