AUD/USD – Aussie jumps (briefly) after RBA surprise rate decision

AUD/USD posted gains close to 1.0% on Tuesday, but has given up most of these gains. The sharp rise was in response to the unexpected decision by the Reserve Bank of Australia to hold rates at 1.50%. Other Australian releases were also positive. Retail sales slowed to 0.3%, beating the estimate of 0.2%. The trade surplus increased to A$4.95 billion, above the forecast of A$4.49 billion. In the U.S., there were no major events. JOLTS Job Openings improved to 7.49 million, beating the estimate of 7.35 million.

The RBA held the course on Tuesday, surprising the markets, which had expected the bank to cut rates to 1.25%. The markets had priced in a rate cut at close to 50%, so the decision to hold rates helped boost the Aussie in the Asian session. However, AUD/USD was unable to consolidate and gave up most of these gains in European trade. The Australian economy has been damaged by the economic slowdown in China, which is Australia’s largest trading partner. Inflation fell to 0.0% in the fourth quarter, its lowest level in three years. This weak release raised speculation of a rate cut, but the RBA continues its wait-and-see stance, hopeful that the economy will find its feet without the help of a rate cut.

U.S. President Donald Trump sent shock waves across the equity markets, after announcing on Sunday that the U.S. would raise tariffs on $200 billion worth of Chinese goods as early as Friday, from 10% to 25%. On Monday, Chinese officials had said it would cancel the talks, but this turned out to be an empty threat. Chinese Vice Premier Liu He is scheduled to lead a Chinese delegation to Washington. Will the new U.S. tariffs be rescinded? Treasury Secretary Steve Munchin said that the tariffs could be cancelled when the talks resume, so the markets could quickly rebound from the current slide.

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AUD/USD Fundamentals

Monday (May 6)

  • 21:30 Australian Retail Sales. Estimate 0.2%. Actual 0.3%
  • 21:30 Australian Trade Balance. Estimate 4.49B. 4.95B

Tuesday (May 7)

  • 00:30 RBA Cash Rate. Estimate 1.25%. Actual 1.50%
  • 00:30 RBA Rate Statement
  • 10:00 US JOLTS Job Openings. Estimate 7.35M. Actual 7.49M

*All release times are DST

* Key events are in bold

AUD/USD for Tuesday, May 7, 2019

Open: 0.6992 High: 0.7048 Low: 0.6981 Close: 0.7004

AUD/USD Technical

S3 S2 S1 R1 R2 R3
0.6744 0.6825 0.6970 0.7085 0.7190 0.7240

AUD/USD posted sharp gains in the Asian session. The pair reversed directions and lost ground in European trade. The pair is flat in the North American session.

  • 0.6970 is a weak support level.
  • 0.7085 is the next resistance line
  • Current range: 0.6970 to 0.7085

Further levels in both directions:

  • Below: 0.6970, 0.6825 and 0.6744
  • Above: 0.7085, 0.7190, 0.7240, and 0.7315

This article is for general information purposes only. It is not investment advice or a solution to buy or sell securities. Opinions are the authors; not necessarily that of OANDA Corporation or any of its affiliates, subsidiaries, officers or directors. Leveraged trading is high risk and not suitable for all. You could lose all of your deposited funds.

Kenny Fisher

Kenny Fisher

Currency Analyst at Market Pulse
Kenny Fisher joined OANDA in 2012 as a Currency Analyst. Kenny writes a daily column about current economic and political developments affecting the major currency pairs, with a focus on fundamental analysis. Kenny began his career in forex at Bendix Foreign Exchange in Toronto, where he worked as a Corporate Account Manager for over seven years.