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Post-RBA blues

Following yesterday’s RBA rate ‘surprise’, we are now starting to see the local currency’s weakness resume yet again.

CFDs are a leveraged product and can result in losses that exceed deposits. Trading CFDs may not be suitable for everyone, so please ensure you fully understand the risks and take care to manage your exposure.
AUD
Source: Bloomberg

AUD/USD hit $0.7711 yesterday and is just starting to slump again, trading at $0.7640. While markets got the timing of the cut wrong, it is clear we still have an easing bias and a rate cut is still likely on the way.

Reasons for not cutting have been centred on macroprudential concerns on housing and an argument around how much of a difference further cuts will make. Yesterday’s strong retail sales reading was also overlooked to an extent as they showed strong consumer demand, particularly in household goods and food.

This is also consistent with strong housing demand as people tend to stock up on electrical goods when they move into a new property or renovate. One of the main reasons the pair gave up some gains was also due to a reinvigorated greenback.

However, the pair seems to be finding some buyers off the lows and, from a price action perspective, perhaps the biggest development was a break of the rejection of the 38.2% retracement at $0.7690. Until the pair can close above this level, I feel sellers will continue to look for shorting opportunities.

AUD/USD
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CFDs are a leveraged products. CFD trading may not be suitable for everyone and can result in losses that exceed your initial deposit, so please ensure that you fully understand the risks involved.