RBA Holds Against a Rate Cut; AUD/USD Rebounds

RBA Holds Against a Rate Cut; AUD/USD Rebounds

The Reserve Bank of Australia Held its Official Cash Rate at its historic low of 2.25% instead of cutting it to 2.00% as some have expected. As we got near statement time, the AUD/USD rebounded from almost 0.7750 to about 0.7840 after the decision and statement was released.

AUD/USD 1H Chart 3/3
rba decision
(click to enlarge)

The 1H chart shows the sharp rally, but the subsequent resistance around 0.7840, which was a previous support pivot in late January. Now, as we enter the 3/3 US session, price has stayed above 0.78, which shows some bullish bias, but then as we approach 0.7840 again, we are seeing a bearish divergence with the RSI in the 1H chart.

With the NFP ahead and the USD gaining this week, the AUD/USD is likely to be pressured after the current rally, especially as momentum stalls.

When we look at the 4H chart, we can see that the support around 0.7750 had help other than the RBA holding rates.

AUD/USD 4H Chart 3/3
audusd 4h chart 3/3
(click to enlarge)

As we can see in the 4H chart, 0.7750 was a common support throuhought late January February. It is essentially the central pivot within the consolidation range between 0.7626  and 0.79. While price is above it, there is a slight bullish bias. But if price falls below 0.7740, we are likely going to see a bearish continuation attempt. The break above 0.7850 would be a false break to the upside, which would translate into a bearish signal especially since the prevailing trend is bearish and intact.

Also, note that the 200-period SMA has been holding, and if price can hold below 0.7850 again, it would show the bulls have lost steam within this consolidation period.

A break below 0.78 would be a near-term clue for traders to pressure the 0.7750 support area again, but perhaps, we need to see the US NFP on Friday before AUD/USD will clearly show direction outside of the February range.

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Fan Yang has been a professional forex trader and analyst since 2007. He specializes in technical analysis and has a Chartered Market Technician designation since 2011. He was the chief technical strategist at CMSFX He was also the founder and chief currency strategist at FXTimes Over the years, Fan has not only been a trader and analyst but also an educator. As a proponent of both technical and fundamental analysis in trading, Fan advocates simplicity and discipline as key factors in making trading decisions when faced with so many "clues" and "signals". Currently Fan Yang is the chief currency analyst and webinar instructor at forexminute.com.