AUD/USD gives up most of its earlier gains and falls back below the 200-hour moving average ahead of US trading
The pair moved to a high of 0.7048 following the RBA decision to keep its cash rate unchanged but has subsequently lost its near-term upside bias as price steadily declines back under the 200-hour MA (blue line).
Although the aussie is still the best performing major currency on the day, it feels a bit anticlimactic that the RBA decision hasn’t really sparked any major upside momentum – even if it may be for a relief – in the currency.
Perhaps the uncertainty surrounding trade talks has a bit to do with that but I reckon it’s also perhaps most traders are looking to fade any rallies in the aussie at this point, as the RBA’s latest stance hinted that they could still be on track to cut rates.
As noted earlier, the statement is a bit convoluted as the RBA points to labour market conditions being able to help support inflation but then going on to cut its inflation forecast for this year and next.
I’m still of the view that the RBA’s decision today is more politically motivated but we’ll now have more than a month to navigate through before figuring out their true intentions. But I reckon as we move closer to the 4 June meeting, I would expect traders to price in the possibility of the RBA cutting rates then; much like today.
As for AUD/USD this week, price now settles into a more neutral bias and I don’t think buyers will be too eager in chasing any post-RBA rallies as long as US-China trade talks are still up in the air. Watch out for how risk sentiment plays out as that will continue to be the dominant factor in markets this week and that will influence how the pair trades in the near-term.
Currently, further support is seen at 0.7006 from the 100-hour MA (red line) before added support from the swing region at 0.6980 and 0.6963 comes into play.