AUDUSD Retreat After RBA Minutes

AUDUSD trades lower after the RBA minutes correcting from 2-month highs as the commentary from the recent RBA meeting kept the door open for future interest rate cuts following the two consecutive cuts in June and July this year. Analysts expect a 25 bps cut in the next meeting as the most possible scenario. The committee noted that the risks to the global growth outlook were to the downside. The trade tensions between USA and China weigh on China’s growth as proved by recent macro data.

The committee outlined three factors that are closely watching in determining its next monetary policy decision.

  • Employment – continued to grow strongly and the participation rate stands at a record high, but the unemployment rate had remained steady at 5.2%.
  • Housing market – housing turnover had remained low. Housing credit growth had remained subdued
  • GDP – growth in Q2 was expected to have been around 0.5%. The major contributions to growth were expected to have been from exports and public demand. Private final demand, which includes consumption, business investment and dwelling investment, was expected to have been weak.

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RBA also follows the recent moves from other major central banks:

“Central banks in a number of other advanced economies had also eased policy or signalled that they were prepared to do so, in response to subdued inflation, moderating activity and downside risks to growth. For similar reasons, central banks in emerging markets had also been easing policy over recent months and had signalled the possibility of further easing.”

Australian equities lifted off session lows after the release of the minutes, managing to break into positive territory with the ASX finishing 0.31% higher.

AUDUSD retreats after the release of the minutes giving up 0.32% at 0.6842 breaching the 50-day moving average. The correction today it is not a surprise as the pair has an impressive run higher from 0.6687 and for nine consecutive sessions. The short term technical outlook is neutral. On the downside, first support for AUDUSD stands at 0.6829 today’s low, then at 0.6806 the low from September 6th, more bids will emerge at 0.6738 the lower band of the August consolidation area (yellow rectangular in the chart), which if breached will open the way for a visit down to 0.6688 the low from August 26th. On the upside now the 50-day moving average has turned into resistance at 0.6850 while next hurdle stands at 0.6869 the daily high.Download our latest quarterly market outlook for our longer-term trade ideas.

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