Last week, the Reserve Bank of Australia cut the cash rate by 25 basis points to 2.5% mainly because growth is below trend and the mining boom is over.  Since November 2011, the RBA has reduced its cash target by 2.25 points to 2.50%.  Some economist believe that the RBA may consider cutting again in November if they don’t see growth outside of the mining sector.  The central bank may cut again as it tries to balance the economy away from exports to China.
After making a new 35-month low last week at .8847, the Australian currency has rebounded sharply after improving data from China and the U.S. dollar trades sideways on “taper†speculation.  With no forward rate guidance provided by the RBA, traders will unlikely get any major negative news until next Monday’s minutes are released.
While many are still pessimistic about the Australian economy, we may not have any major negative triggers until next week.  Unless we see blockbuster statistics across tomorrow’s board regarding the U.S. economy, this Aussie rebound may continue a little bit longer.  If price is able to accelerate and take the .9215 for over an hour, bullish momentum may reach the .9260 area.
Further upside however may be limited and a bearish ABCD pattern may form near the .9300 handle.  We may target a steep decline towards .9075. If price exceeds the .9320 region the bearish pattern may be invalidated and further momentum may target .9375.
