The RBA Meeting Minutes from from the June 7th policy review were published today. Minutes contained no indication of further rate cuts which has kept a positive momentum going in the AUD. It has gained today against the USD, EUR and CAD while it has lost ground to against JPY and NZD. In May the central bank cut rates lower to 1.75 (a record low) in a surprise move and signalled at the time that inflation was expected to remain subdued for some time. Lower AUD has helped the economy and supported the labour market. Unemployment has dropped from 6.25 to 5.75 in the first quarter. At first the rate cut produced further depreciation in the currency but it was soon reversed and AUDUSD has rallied over 4% since the low at the end of May. At the time of writing AUDUSD is trading above the levels it was at the time of the May 7th rate cut. Traders seem to be bidding the pair higher on the back of the belief that the RBA has reached the end of the easing cycle. This however could change if the currency appreciated significantly from the current levels and started to impact the employment numbers.
Technically AUDUSD has created a bullish higher low (at 0.7285) in the daily picture and is currently challenging the high at 0.7504 created in the beginning of June. This level coincides with the 0.50 Fibonacci retracement level but the preceding higher low together with the strong economic picture and the recent RBA communication suggests that the market is more likely to push through this resistance. The next significant resistance area after 0.7504 is at 0.7574 – 0.7600 while the nearest daily support is at 0.7410. The nearest intraday support area can be found at 0.7435 – 0.7465. I’m looking for buy signals inside the support area. My targets are as follows: T1 is at 0.7500 and T2 at 0.7570. Alternatively, if price breaks above the resistance without a retracement to support then I’m applying the strategy our traders know from the Live Analysis Webinars. Should that be the case, the 0.7570 becomes the T1 while T2 would then be at 0.7605.
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Chief Market Analyst
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