Traders have been expecting a rate cut from the RBA, even in the previous meeting. Indeed, Glenn Stevens and the bank delivered cutting the official cash rate (OCR) from 2.25% to 2.0%. This is the second rate cut this year and should put pressure on the currency, especially after recent strength. However, traders brushed off the rate cut and continued to bid up the Aussie hours after the announcement.
(RBA Governor: Glenn Stevens; courtesy of marcobusiness.com.au)
There was an initial bearish reaction in the AUD, but apparently, traders were not done buying the Aussie. Let’s take a look at AUD/USD and AUD/NZD.
Yesterday, we saw AUD/USD hold above 0.78. We mentioned that if the pair stays above 0.78, the bullish outlook was still in play, especially since the 4H RSI was still holding above 40, which was a sign that the prevailing bullish momentum was still in play.
After the RBA announced the rate cut, there was an initial dip to about 0.7710 but this was quickly reversed. In the hours following the statement, traders continued to buy up the AUD/USD putting pressure on the 0.8075 high with risk of extending higher in its current bullish correction.
In the daily chart we can see that price appears to be putting in a bottom. The rebound today forms a bullish “slingshot” and puts the 0.8230-0.8250 support/resistance area in sight. This bullish outlook is as much about the current USD-weakness as it is about AUD-strength. Let’s take a look at the AUD/NZD.
The AUD/NZD rallied from a double bottom last week, and stalled ahead of the RBA statement. We noted that the Aussie-Kiwi was staying bullish and noted that if price held above 1.0225 it should remain bullish. The initial reaction after the RBA rate cut was similar to that of the AUD/USD, with traders buying the dip.
Now, the AUD/NZD has upside risk to the 1.07-1.08 area, which involves the 200-day SMA, and a previous support/resistance area.
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