The big event in early Tuesday trading was the policy meeting of the Reserve Bank of Australia. There were no high expectations, most analysts predicted “no action”, fitting after the interest rate cut last month. Indeed, the RBA left rates unchanged at 2.75%, calling this level appropriate for now. As if expecting soft stance from the central bank, the Australian Dollar had rallied in hours before the announcement, reaching as high as 0.9790.
This advance proved to be premature and the Aussie turned south after the data release. The RBA indicated it could introduce more easing if inflation warranted such step. In addition, there was a warning about high level of the AUD, leading some to believe that another interest rate cut is more than likely in the future. While the AUD-USD avoided a strong selloff, it dropped for the rest of the day, falling to as low as 0.9610 late during the New York session.
From a longer-term perspective, it was important development. So far, the AUD-USD remains above the 0.95 key support. No question about the general direction, it remains down, but the price may have found footing, at least for now. The Aussie faces another test in couple of hours, in form of the GDP numbers. Markets expect to see contracting economic picture, at 2.7%, down from 3.1% on annual basis. It will be interesting to see how traders react to the actual numbers, but chances are good for the AUD to enter consolidation in this general area.
Few days ago, I discussed a trade in the AUD-NZD. For some time, I have been moving a buy order, tracking latest minor highs. Eventually, the order was filled at 1.1985 and produced a profit of 100 pips relatively quickly. It was a nice, short trade with good result, especially for this cross. I will review it again when warranted.
Mike K.