AUD/USD Drops Back Below 0.7300, Erasing Tuesday’s Gains

AUD/USD Drops Back Below 0.7300, Erasing Tuesday’s Gains

18 May 2016, 08:36
Roberto Jacobs

AUD/USD Drops Back Below 0.7300, Erasing Tuesday’s Gains

The AUD/USD pair erased all of its Tuesday’s gains on the back of not so dovish RBA meeting minutes and dropped back below 0.7300 handle as investors now look forward to minutes from April’s FOMC policy meeting.

The RBA meeting minutes, released on Tuesday, revealed that the central bank was more inclined to wait for further information before easing further as it expects inflation to pick-up to 1.5%-2.5% by mid-2018. The not so dovish minutes dampened expectations of further rate-cuts in the near-term, boosting the pair beyond mid-point of 0.7300 handle.

The pair, however, reversed all of its gains on hawkish comments from various Fed members on Tuesday. A similar tone in the minutes might resurface expectations of a Fed rate-hike, sooner rather than later, and punish commodity-lined currencies like the Aussie.

From technical perspective, the pair failed to sustain its move back above 100-day SMA and is now headed back towards the very important 200-day SMA. A follow through weakness below 200-day SMA would now open room for further near-term pain for the AUD/USD bulls.

Technical levels to watch

On the immediate downside, 200-day SMA near 0.7260-50 region, might continue to extend some support for bulls, below which the pair seems to immediately drop towards 0.7210-0.7200 round figure mark support.

Meanwhile on the upside, 100-day SMA near 0.7340 region, closely followed by 0.7365-70 horizontal zone, now seems to cap immediate upside for the pair. Only a convincing strength above these resistance levels might negate the near-term bearish bias.


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