The minutes of the last meeting of the Reserve Bank of Australia (RBA) further undermined Monday’s attempts at re-establishing upside moves, as expectations of further easing by the RBA grew. These expectations have drawn the AUDUSD closer to the 0.7000 price level; the first time in nearly a month that this has happened.
The RBA minutes released early this morning indicate that the bank could drop the key policy rate and the yield target of the 3-year government debt instruments to 0.10% at the next meeting on November 3. A new QE program could also be on the cards, which could include the addition of 5-10 year bonds to the asset purchase program up to 100 billion Australian Dollars.
Further comments from the deputy governor of the RBA, Chris Kent also suggests that negative rates are very much on the cards, contrary to earlier claims by his principal that the RBA would not follow that route.
These minutes and comments put the pair under further pressure after the pair had undergone a bullish correction in Monday’s session. The AUDUSD was down nearly 50 pips at a point, but some intraday recovery has pulled it back to a 20-pip drop.
The AUDUSD has breached the 0.70595 support line, as it extends the decline on the back of the RBA’s minutes. The price needs confirmation of the breakdown to target the 0.70034 support, with 0.69160 also in position as a potential future downside target.
On the other hand, a bounce from the present support may search for a short-term rally towards the August 4 and October 6 lows at 0.71010 or 0.71363. Sellers may allow rallies to any of these areas before initiating further selloffs, as the bias on the AUDUSD is bearish as per the
RBA’s pronouncements of potential easing.
