The Australian dollar has spent much of its time since Friday consolidating gains versus the US dollar between 0.7085-0.7200. With key event risk on hand overnight, we could see a break.
Reserve Bank of Australian (RBA) Rate Decision – April 7
According to a Bloomberg News poll of economists, the Reserve Bank of Australia (RBA) is anticipated to leave their cash rate target unchanged for the second straight month at 3.25 percent at 00:30 ET on Tuesday, but with Credit Suisse overnight index swaps fully pricing in a 25 basis point reduction, there is significant “surprise” potential. After the central bank’s last meeting, RBA Governor Alan Bollard said, “Together with the substantial fiscal initiatives, the cumulative decline in interest rates will provide significant support to domestic demand over the period ahead,” suggesting that further reductions were unnecessary. Since then, though, data has shown that Q4 GDP unexpectedly fell negative by 0.5 percent, the first decline in eight years. Overall, an “unexpected” rate cut is likely to weigh AUD/USD below immediate support at 0.7085, but the extent of those declines will hinge on Bollard’s statement. Indeed, regardless of whether or not we see a rate cut tonight, signs that the RBA is considering cutting the cash rate target again further down the road could trigger AUD/USD declines toward the psychologically important 0.7000 level, or even trendline support at 0.6950. On the other hand, if Bollard suggests a neutral stance, the Australian dollar could bounce.
Source: FXTrek Intellicharts
