RBA cut but took out easing bias
The AUDUSD is moving lower on the day as traders position for the RBA meeting minutes to be released during the new trading day tomorrow (9:30 PM ET).
If you recall, the RBA cut rates at their May 5th meeting by 0.25% to 2% but they did omit an easing bias from the statement. This led to a sharp rally in the pair to resistance at the 0.8030 level (see blue circles on the daily chart below). Note that the price of the AUDUSD moved above the 100 day MA (blue line in the chart below) on the day of the cut and later on May 8th, tested and held that 100 day MA. Holding key MA support, helped the pair propel higher from the May 8th low.
At the high last week, the price moved above trend line resistance at the 0.8133 level (green circles in the chart above). The failure to keep the price above the trend line, has led to corrective pressure over the last few trading days. Today, comments from RBAs Lowe that implied an easing was still in the cards when he said "we still have scope to lower interest rates if we need to".
The price has been able to stay below the 0.8030 level over the last 16 hours of trading (the corrective high reached 0.8028). This level will be my key "line in the sand"is once again for today/this week. Stay below and the sellers are in control (this is RISK for shorts). The downside will look toward the 0.7912-37 area. This was the highs from February and March 2015. An upward sloping trend line on the daily chart slashes through this area at the 0.7926 level (see daily chart above).
Looking at the four-hour chart, the 0.7940 level is the 100 bar MA on the 4 hour chart (blue line in the chart below) and an upward sloping trend line (discounting the rate decision day quick low). This level is within a few pips of the March 2015 high. A move below that level and the door opens for a possible test of the 100 day MA again.
Like the EURUSD, the rally in the AUDUSD is probably a surprise for traders. The rally has been helped by weakness in the US dollar on the back of continued weaker data. The RBA cut in February and again in May followed by the omission of the easing bias may suggest the central bank is on a cut, wait and see, approach with 3 months being the patience they will give. Do they want a lower currency? Probably. I don't think they would not mind getting some terms of trade help via a lower currency. Technically, is the move below the 0.8030 level today a bearish clue? It is to me as it defines and limits risk and I think the market can easily see the importance of the level - especially from the daily chart.
