Last night, AUD/USD rose as high .7844 as market participants await the Reserve Bank of Australia rate decision. Expectations are pretty high that the Bank will cut the cash rate later tonight.
Price made a key low at .7801 after Australia’s largest trading partner, China showed that their manufacturing sector continues to contract. The HSBC Final Manufacturing PMI came in at 48.9, much lower than the 49.4 forecast.
Price action on the AUD/USD daily chart shows that the recent three-day slide is tentatively respecting the .7800 handle. If the RBA does cut rates later tonight, selling pressure may take the currency pair all the way down towards the 50-day SMA. We may also eventually see price attempt to make fresh 2015 lows.
If the RBA surprises and keeps rates steady, immediate upside targets include the .7950 region. Critical resistance remains the psychological .8000 handle. A daily close above here, could see further bullishness target .8250.
The trade: SELL AUD/USD at .7875, with a stop loss at .7950 and take profit at .7725. The risk/reward ratio is 1:2
Edward J. Moya
Senior Market Strategist
WorldWideMarkets Online Trading