The Reserve Bank of Australia, RBA, left interest rates unchanged at 4.75%, highest rates amongst the majors.

The statement released by Glenn Stevens, Governor of RBA, was far from being hawkish and can be characterized as neutral.

Here are some interesting comments from the statement:

  • In the household sector thus far, there continues to be a degree of caution in spending and borrowing and a higher rate of saving out of current income
  • Sharp fall in real GDP as a result of floods and cyclones
  • Over the medium term, overall growth is likely to be at trend or higher
  • Growth in employment has moderated over recent months
  • Most leading indicators suggest that this slower pace of employment growth is likely to continue in the near term
  • The exchange rate remains, in real effective terms, close to its highest level in several decades. If sustained, this could be expected to exert restraint on the traded sector.
  • The Bank expects that, as the temporary price shocks dissipate over the coming quarters, CPI inflation will be close to target over the next 12 months

After the release of the statement, AUD/USD sold off from 1.0740 to a daily low of 1.0670. 

The currency has since recouped part of the losses and is currently trading at 1.0720.

The next move in the AUD/USD will come from risk appetite.  The correlation between AUD/USD and S&P is very strong, higher equities higher AUD/USD and vice versa.

We have Australia employment numbers on June 8th at 9:30PM EST.

Expectations are as follows:

Employment Change 25.6K forecast vs. -22.1K previous

Unemployment Rate 4.9% forecast vs. 4.9% previous

Here is a 4hr chart of the AUD/USD with a possible wedge pattern breakout. A breakout higher will lead to 1.08, 1.0882.  A move lower and 1.06 is a strong support.

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Source: FXCM

The Chart below is the Daily AUD/USD.  If a break lower does occur we can see the currency pair attempt to hit the trend line.  The 55SMA is at 1.0592, 100SMA 1.03465, and 200SMA 1.00669.

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Weekly Support Levels: 1.06, 1.05, 1.0422

Weekly Resistance Levels: 1.08, 1.0878, 1.0983