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Jul 2 2019, 10:13 PM (+06) |


Unfortunately, we must admit that all our expectations about Aussie dollar, which we had mentioned in our review on June 24, were not met.

The Reserve Bank of Australia cut the interest rate to 1% on Tuesday. And here is the summary of the meeting:

  • RBA will adjust policy to support sustainable growth
  • RBA: Central scenario for underlying inflation to be 2% In 2020
  • Main domestic uncertainty continues to be outlook for household consumption
  • Downside risks from trade disputes affecting business investment globally

The RBA’s position is quite clear. The bank is trying to stimulate the economy.

Picture 1. Australia inflation rate

Despite the fact that the US and China decided to make a pause into so-called ‘trade war’, RBA does not want to wait and decides to push its consumption up.

From the technical point of view, in our previous review we were thinking of short positions from the trend line, but the trend line was broken up and the AUD continued to rise. The situation has changed rapidly. That is why we suggest to look at the AUD/USD pair again.

Technical analysis

On a daily time frame, the pair touched 50% Fibo correction level (0,70188). The movement down started after G20 meeting, when the traders saw that the risks of further escalation of the trade war are low. The candlesticks formed some type of a bearish engulfing pattern. Aussie returned back to its 38,2% Fibo level and continued to move down. Tuesday’s RBA meeting led to the growth of the AUD. Right now, we think there are two possible ways for the currency.

The pair may continue to decline. In this case, it’s better to wait until the pair breaks the 38,2% level down again (it has to stay below 0,69746). The target for Aussie will become 0,69400 (the previous trend line, which was broken up on June 26).

If the pair rises again, we strongly recommend to wait until the AUD breaks the level 0,70188 up before opening longs. Next target is 0,70629. 

Picture 2. AUD/USD 1D TF

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