AUD/USD – Australian dollar dips as RBA broadly hints at June rate cut

AUD/USD has posted losses on Tuesday, after starting the week with gains. Currently, the pair is trading at 0.6881, down 0.38% on the day. On the release front, the RBA released the minutes from this month’s policy meeting. On the release front, the Australian CB Leading Index posted a gain of 0.3%. Today’s highlight is the Construction Index, which is expected to post a 0.1% gain, after two sharp declines. In the U.S., existing home sales dipped to 5.19 million, down from 5.19 million a month earlier. This was well off the estimate of 5.35 million.

The RBA surprised the markets earlier in May, when it maintained the key interest rate at 1.50%. The markets had priced in a rate cut of 25 basis points, given that economic growth has been dampened by the global trade war, in particular the slowdown which has gripped China. Rate-setters balked at lowering rates, but the minutes of the May meeting were dovish, raising the likelihood of a rate cut at the June policy meeting. The minutes discussed the “uncertainties” regarding the bank’s inflation target of 2.0%. As well, policymakers dropped a reference to “not a strong case” for a rate move in the near future, which appears to be a bias in favor of easing. RBA Governor Lowe spoke on Tuesday and the message was even clearer. Lowe stated that a “decrease in the cash rate would likely be appropriate.”  The markets responded by pricing in a rate cut in June at 91%, so the Aussie could face further headwinds as investors look for more attractive alternatives.

The Aussie posted gains on Monday, receiving an unexpected boost from the general election results. Prime Minister Scott Morrison’s conservatives had been widely expected to lose to the center-left Liberals. Morrison had trailed badly in the polls throughout the campaign, but came from behind in stunning fashion to pull off the victory. The markets reacted favorably to the election results, and AUD/USD climbed as high as 1.0% on Monday.

Sterling Trades at Five Month Lows on Brexit worries

Dow futures pop 150 points after US eases trade restrictions on Huawei

China Says Firms are not Exiting Due to Trade War

AUD/USD Fundamentals

Monday (May 20)

  • 21:30 RBA Monetary Policy Meeting Minutes

Tuesday (May 21)

  • 10:00 US Existing Home Sales. Estimate 5.35M. Actual 5.19M
  • 10:30 Australian CB Leading Index. Actual 0.3%
  • 10:45 US FOMC Member Evans Speaks
  • 12:00 US FOMC Member Rosengren Speaks
  • 20:30 Australian MI Leading Index
  • 21:30 Australian Construction Index. Estimate 0.1%

*All release times are DST

* Key events are in bold

AUD/USD for Tuesday, May 21, 2019

AUD/USD May 21 at 11:25 DST

Open: 0.6908 High: 0.6929 Low: 0.6867 Close: 0.6883

AUD/USD Technical

S3 S2 S1 R1 R2 R3
0.67686 0.6744 0.6825 0.6968 0.7085 0.7190

AUD/USD dropped considerably in the Asian session. The pair showed limited movement in European trade but then retracted. AUD/USD edged lower in North American trade but has recovered.

  • 0.6825 is providing support
  • 0.6968 is the next resistance line
  • Current range: 0.6825 to 0.6968

Further levels in both directions:

  • Below: 0.6825, 0.6744 and 0.6686
  • Above: 0.6968, 0.7085, 0.7190 and 0.7240

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.