As widely expected, the Australian central bank, the RBA, cut the main interest rate from 2.75% to 2.50%. Given recent negative signs regarding the economy and inflation as well as comments from RBA governor Glenn Stevens, the move was widely expected.
So, after the big sell off in the previous week, AUD/USD finally recovered and rose from around 0.8920 to as high as 0.8988 before ticking a bit lower. Will AUD/USD continue recovering now that the news is out? Or will is it a temporary correction for profit taking?
In the statement accompanying the decision, the RBA did leave the door open to more cuts, but wasn’t extremely dovish. As with the US, it probably all depends on the incoming data: employment, inflation capital expenditure, etc. The RBA isn’t likely to make a move next month, as it coincides with the elections.
It’s important to note that the pair did not manage to climb above 0.90 – this is a very important line and a failure to break above it is a bearish sign.
A first dip below 0.90 was followed by a big upwards correction. A second move already left dust behind it, and also now, at the time of writing, the ronud number was not tackled.
For more lines, events and analysis, see the AUDUSD forecast.
