Traders Brush off the RBA Rate Cut; Aussie Strengthens

Traders Brush off the RBA Rate Cut; Aussie Strengthens

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

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.

AUD/USD 4H Chart 5/5
(click to enlarge)

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.

AUD/USD Daily Chart 5/5
(click to enlarge)

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.

AUD/NZD Daily Chart 5/5
(click to enlarge)

The AUD/NZD rallied from a double bottom last week, and stalled ahead of the RBA statement. We noted thatĀ the Aussie-Kiwi was staying bullish and noted that if priceĀ 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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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