The Reserve Bank of Australia (RBA) met and voted on monetary policy today (12/2). The RBA statement showed that economic expectations remain cautious and subdued, and that the Australian Dollar is still overvalued. There was not much difference from the previous monetary policy decision to hold the official cash rate at 2.50%.
The AUD/USD started the week lower, but bounced up from a new low on the year around 0.8416. After the RBA statement, the AUD/USD stalled at 0.8540 and is retreating. The 4H candlesticks are suggesting a reversal back to the downside, with the 0.8525 area in sight, and with risk of breaking lower to 0.84.
Respecting Resistance: On the 4H chart, we can see that AUD/USD respected a previous resistance pivot and a falling speedline, while the RSI held below 50. These all suggest maintenance of the bearish outlook as well.
Bearish Continuation: Now, the USD has been cooling off a bit lately, so the AUD/USD’s decline is indeed an Aussie-story since mid-November. The AUD/USD is poised to continue its downtrend unless there is a rally above the 0.8615 resistance pivot and last week’s high, which would also clear above the falling trendline coming down from the 0.8795 November high.
Reversal scenario: In the scenario that price pulls back above 0.8615, there will be a challenge/resistance around 0.87, near the 200-period SMA in the 4H chart and another falling trendline coming down from October’s high. Below 0.87, price is neutral-bearish. But If price can start holding above 0.85 and push above this key 0.87 resistance, then we might have a bullish reversal at hand.
Target/Support: Going, back to the current mode, the downtrend, we have to take a look at the monthly chart to see what the next key support is.
The monthly chart shows a key support/resistance area: 0.7980-0.8080. This area involves the 2010 low, an a support/resistance pivot going back to 2005, and the key psychological level of 0.80.
We should also note that 0.7945 is the 61.8% retracement of the 2009-2011 uptrend. With the RSI approaching 30, we should watch this area around 0.80 as they next key support in the medium-term.
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