AUDUSD Nosedives As RBA Cuts Interest Rate

The Australian Dollar (AUD) nosedived against the US Dollar (USD) yesterday, dragging the price of AUDUSD to less than 0.7500, following the Reserve Bank of Australia (RBA) interest rate decision. The technical bias has also turned bearish because of a Lower Low in the ongoing wave.

Technical Analysis

As of this writing, the pair is being traded near 0.7484. A support may be noted near 0.7385, a major horizontal support ahead of 0.7300, the psychological number and then 0.7281, another major horizontal support on the daily chart.

On the upside, the pair is likely to face a hurdle near 0.7500, the confluence of horizontal resistance as well as psychological number ahead of 0.7718, the intraday high of yesterday. The technical bias will remain bearish as long as the 0.7835 resistance area is intact.

RBA Interest Rate Decision

The Reserve Bank of Australia on Tuesday cut the cash rate to a record low of 1.75 per cent in a bid to head off falling prices and an economic downturn. The cut, the first in a year, came less than a week after a shock drop in core inflation to well below the central bank’s 2 per cent to 3 per cent target band.

Most economists expect a second cut before the end of the year, although some say the June quarter inflation figure, out in August, will determine the RBA’s next move. Tuesday’s historic interest rate reduction coincides with the federal government’s third budget, which is expected to be mildly stimulatory despite pressure to narrow the deficit.

Trade Idea

Consider the overall technical and fundamental outlook, selling the pair around current levels could be a good strategy in short to medium term.

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Usman Ahmed

Usman Ahmed is an individual forex trader and market analyst. He holds a Masters of Business Administration (MBA) degree. His work includes fundamental and technical reports on various currency pairs, commodity futures and stock markets. His technical analysis features price action strategies.

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