RBA Preview: AUD/USD Bearish South of $0.67

Steffy Bogdanova
April 17, 2023 10:39 pm

This article was submitted by Aaron Hill from FP Markets.

Following the Bank of Canada (BoC) hitting the pause button on policy tightening, the Reserve Bank of Australia (RBA) followed suit at its previous meeting. This saw the central bank hold the Official Cash Rate at 3.6%, following ten consecutive rate hikes from May 2022, totalling 350 basis points.

RBA Preview: AUD/USD Bearish South of $0.67, FP MarketsRBA Preview: AUD/USD Bearish South of $0.67, FP MarketsRBA Preview: AUD/USD Bearish South of $0.67, FP MarketsKey Points Out of the RBA Statement:

The Board recognises that monetary policy operates with a lag and that the full effect of this substantial increase in interest rates is yet to be felt.

Growth in the Australian economy has slowed, with growth over the next couple of years expected to be below trend.

The labour market remains very tight. The unemployment rate is at a near 50-year low and underemployment is also low.

The Board expects that some further tightening of monetary policy may well be needed to ensure that inflation returns to target. In assessing when and how much further interest rates need to increase, the Board will be paying close attention to developments in the global economy, trends in household spending and the outlook for inflation and the labour market.

The minutes from the latest RBA meeting will likely emphasise the above points, though traders will keep a close eye on the text for insights regarding future rate moves.

Regarding STIR markets, there is currently around an 80% probability of the RBA holding rates unchanged at its next meeting at the beginning of May.

Market Analysis

AUD/USD Technical Position:

Since the beginning of March, the AUD/USD currency pair has echoed a subdued tone around the late November lows (2022) at $0.6585 on the weekly timeframe. Overhead, resistance warrants attention at $0.7020 with scope to pursue deeper terrain as far south as demand from $0.5975-0.6166.

Interestingly, out of the daily timeframe, buyers and sellers are squaring off at the underside of the 50-day and 200-day simple moving averages at $0.6742. Technicians will also note the possibility of a Death Cross forming (50-day SMA crossing under the 200-day SMA, a move indicating a longer-term bearish trend reversal could be on the table). This shines the technical spotlight on support coming in at $0.6550, a level I have been watching for a few months.

Shorter term, we are below the $0.67 handle on the H1 scale, after an earnest attempt to hold the base as support on Friday and in recent trading. I do not see much active support to the downside until between $0.6645 and $0.6664. As a result, because of the room to navigate lower levels on the bigger picture (weekly and daily timeframes), sellers will likely take control south of $0.67 to at least $0.6664; a retest of $0.67 is also certainly not out of the question.

RBA Preview: AUD/USD Bearish South of $0.67, FP MarketsCharts: TradingView

One of the simpler harmonic patterns is the AB=CD equivalent configuration, which graced the H1 chart of USD/JPY in recent trading.

Disclaimer: The information contained in this material is intended for general advice only. It does not take into account your investment objectives, financial situation or particular needs. FP Markets has made every effort to ensure the accuracy of the information as at the date of publication. FP Markets does not give any warranty or representation as to the material. Examples included in this material are for illustrative purposes only. To the extent permitted by law, FP Markets and its employees shall not be liable for any loss or damage arising in any way (including by way of negligence) from or in connection with any information provided in or omitted from this material. Features of the FP Markets products including applicable fees and charges are outlined in the Product Disclosure Statements available from FP Markets website, www.fpmarkets.com and should be considered before deciding to deal in those products. Derivatives can be risky; losses can exceed your initial payment. FP Markets recommends that you seek independent advice. First Prudential Markets Pty Ltd trading as FP Markets ABN 16 112 600 281, Australian Financial Services License Number 286354.

Opinions are personal to the authors and do not reflect the opinions of LeapRate. This is not a trading advice.

LeapRate Analyst

Experienced writer and journalist, working in the global online trading sector, Steffy is the Editor of LeapRate. She has previous experience as a copywriter and has been with the company since January 2020. Steffy has a British and American Studies degree from St. Kliment Ochridski University in Sofia.
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