Shorts In Control – AUDUSD Falls As RBA Leaves Rates Unchanged

The AUDUSD is moving downwards in the current session without volatility following the Reserve Bank of Australia announcement of maintaining an unchanged benchmark rate at 1.75%.

The report from the Australian Bureau of Statistics on Monday (4/7) hinted at a steady waning of inflation, which has fallen under the 2-3% target zone. Australia’s trade balance in May fell to a seasonally adjusted -2.218 billion, from -1.785 billion in the preceding month. A negative balance of trade indicates that more goods and services were imported than exported. Additionally, Australian retail sales in May came in at 0.2%, missing the expected reading of 0.3%. The reading was most affected by a sharp deceleration of 1.1% in the household goods retailing sector.

Today, the Reserve Bank of Australia (RBA) ended its July policy meeting with no guidance on whether there might be any further easing measures in the future. RBA decided to keep its interest rates at an all-time low of 1.75%, due to political uncertainty at home and abroad and a lack of supportive data on domestic inflation.

A rate cut at the next meeting in August still lingers on the minds of some traders, with the probability of an interest rate decrease, priced at 60%. The mounting concern on interest rates, has cast a shadow on the Aussie dollar, dragging down the pair AUDUSD to 0.75067 after a 5-day up move.

Meanwhile, later today, the U.S Census Bureau is due to release some important data. Factory Orders in May are expected to register at minus 0.8%. The reading for April came in at 1.9%. A positive reading indicates rising purchase orders, which lifts manufacturing activity and vice versa. Also, the TIPPOnline consumer confidence index, also scheduled to be released later today, is forecast to come in at 49.3, suggesting continuing pessimism over current and future economic conditions.

The dollar index DXY, which tracks the strength of U.S dollar against a basket of six major currencies, fell 0.62% to 94.3 from the last settlement.

Markets are waiting for any surprises from the minutes of the June FOMC meeting, to be released on Wednesday (6/7) and, more importantly, the Non-farm payrolls on Friday (8/6).


Fig. AUDUSD H4 Technical Chart

After 5-days of a sharp rise in the buildup to the RBA meeting, the AUDUSD failed to surpass the 23.6% Fibonacci retracement, and has been falling back today. The AUDUSD is on track to weaken against the greenback. Currently, AUDUSD has been locked in an upward channel and has just hit the upper bar. The pair is expected to fall back to the 38.2% support at 0.74555. Before that, the price is nearing the two Mas, and may attempt to test the support levels. A brief correction is anticipated.

Trade suggestion

Sell stop at 0.74812, Take profit at 0.74406, Stop loss at 0.75118

Sell stop at 0.74812, Take profit at 0.74406, Stop loss at 0.75118.

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