AUDUSD To Remain Bearish as RBA Could Cut Rates in February

The trend in AUDUSD remains downwards below the 0.6872 level, and the price is at risk of trading to the October 15 low of 0.6721. The Australian dollar has come under pressure since the start of the month as the tides have once again turned in the favor of the US Dollar.

In the October 30 Fed rate meeting when the AUDUSD reached a multi-month high, the US central bank cut rates but also indicated that they were in no hurry to cut rates again. The next meeting will take place on December 11, however, the market is giving it a 93.4% probability that the rate will remain unchanged in the 150-175 interval. That leaves the RBA cash rate a full 0.75 basis points lower than the Fed’s Funds rate, shifting the money flow to the US Dollar. The wide difference in interest rates might widen further in February, as Westpac pencils in another 25 bps rate cut by the RBA. In the US, rate markets are giving it a 60% probability that the rates remain at the current level or higher by the June 2020 FOMC meeting.

The Federal Reserve is happy to wait with rate changes as they would like to see how the latest rate cuts influence the economy, while the RBA is worried about the worsening Australian unemployment rate and soft wage growth. Overall, the yield spread looks to remain in the favor of the USD, and looks to leave the AUDSUD pair under pressure.

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Techincally, the AUDUSD pair will remain under pressure as long as the price trades below the 0.6860 level and I supect that traders will short if the price trades to the 0.6824 – 0.6860 interval. The next support level is the 0.6749 level followed by the October 15 low at 0.6721.More content