RBA Cuts Rate by 25 bps, AUDUSD Hit Monthly Lows
The AUD/USD price formed a bearish flag pattern after the latest RBA interest rate decision. The pair is trading at 0.7760, which is a few pips above last week’s low of 0.7692.
What happened: The RBA completed its two-day meeting and did what most analysts were expecting. The bank left the main interest rate at 0.10% and the size of its A$200 billion quantitative easing (QE) program unchanged.
The decision came a day after the RBA doubled the size of its bond purchases from A$2 billion to A$4 billion. In its statement today, the bank said that it did that to restore functionality in the bond market. This is after Australia’s bonds jumped last week.
The context: The RBA, like all central banks, has been working to support the economy amid the pandemic. It has lowered interest rates to a record low of 0.1% and announced its first QE program on record. With Australian bonds rising last week, many analysts were expecting the bank to increase the size of its QE program.
The AUD/USD price has been under pressure lately. After reaching a YTD high of 0.800 last week, it retreated to a low of 0.7695 on Friday. This was a near 4% decline. In the past two days, however, the pair seems to be forming a bearish flag pattern that is shown in black. It has also moved slightly below the important resistance level at 0.7818.
Therefore, there is a likelihood that the pair will resume the downward trend as bears target the next support at 0.7700. However, a move above 0.7818 will invalidate the bearish thesis.
