Last week, the RBA Chairman delivered a sucker punch when he announced that there was room for a 10 bps rate cut. In his words, he said it was “reasonable to expect that further monetary easing would get more traction than was the case earlier”. This is about the strongest indication that the RBA would further ease rates at its November 3 meeting. It is also expected to expand its asset purchase program by buying five-year to ten-year maturity bonds. The balance sheet of the bank is expected to grow as a result.
The speech by the RBA Chairman could have overridden the RBA’s last policy meeting minutes, so there may not be much of a market reaction to it. Perhaps, if there is a statement in the minutes that reinforces the RBA’s position, then it could become relevant to price action.
The AUDUSD is expected to continue the downside if the RBA minutes re-echo what the RBA Governor said before the last employment data. This may come from an immediate breakdown of the 0.70595 support, with 0.70034 and 0.69160 forming downside targets.
On the flip side, any recovery on the pair would be a corrective pullback to the upside, which may get traction from a bounce on the 0.70595 support. This move targets 0.72043, with 0.72977 also serving as a potential upside target. However, there is a good chance that traders may be looking for areas to initiate new shorts. So watch out for any recent highs as possible areas where this may happen.