AUD/USD Up As Dovish RBA Minutes Force Rate-Cut Rethink

The Australian dollar has had a lift from RBA minutes suggesting that the decision to cut rates in May was less unanimous than previously thought.

On Monday, the Reserve Bank of Australia (RBA)’s latest monetary policy meeting minutes suggested that the bank will hold off on cutting interest rates further, while they assess the impact of the policy easing announced two weeks ago. The Australian dollar jumped the most in more than a month right after the minutes released.

Previously on May 3, the Reserve Bank of Australia cut its benchmark interest rate from 2% to 1.75%, the first cut after a year, as Australia’s inflation rate softened. The Australian dollar has been on an overall decline after surprisingly soft inflation data came out in April. Inflation fell into negative territory for the first time since 2009(prices fell instead of rising). The Aussie has tumbled 6.7% from 0.7813 in mid-April to 0.7287 as of yesterday’s close.

Meanwhile, the greenback has weakened today as gold rises along with higher oil prices due to supply disruptions in Nigeria, political instability in Venezuela and upgraded price forecasts for the second half of the year by Goldman Sachs, the powerhouse US investment bank in the energy space. The US dollar index fell 0.14 percent to 94.45 so far on Tuesday.

In US data released Monday, the Empire State manufacturing index for May came in at -9.0, a big miss from the 7.2 forecast. The NAHB housing market index in May was reported at 58, below expectations for a reading of 59.

Later this evening traders are getting ready for important US data releases with building permits, CPI, core CPI, housing starts, capacity utilization rate and industrial production reports on the schedule.

audusd d1

Fig. AUDUSD D1 Technical Chart

After plunging to as low as 0.72461, the pair has begun tracing a two-day up move and is currently settling at 0.73247. Despite recent gains, the red arrow above the price line and ADX of 41.06 both suggest that the downtrend is still overwhelming for the long term. AUD/USD is expected to return to the bearish move after retesting the resistance at 0.74025.

Trade suggestion

Buy at 0.73252, Stop loss at 0.72734, Take profit at 0.73905

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