The Aussie has been hard hit by the dollar’s strength in yesterday’s trading. AUDUSD traded lower from 0.6798 to 0.6767 where it bottomed. By the end of Monday’s trading, the currency pair was down 12 pips at 0.6767.
Now, all eyes will be on Reserve Bank of Australia (RBA) Governor Phillip Lowe as he is scheduled to make a speech in Sydney at 9:05 am GMT. This is going to be a particularly important event for the Aussie because the central bank head will talk about monetary policy.
Forex traders expect the RBA Governor Lowe to discuss the effects of unconventional monetary policy tools such as quantitative easing and negative interest rates adopted by other countries. It is likely that he will discuss how these measures may or may not be appropriate for Australia. If you remember, Australia has been one of the few developed countries that have not resorted to aggressive monetary easing. It has, however, cut rates multiple times and brought them to record lows time after time.
Currently, the RBA’s interest rate is at 0.75%. If RBA Governor Lowe hints that this level is enough to support the Australian economy amid uncertainties brought about by the trade war, the Aussie could rally. On the other hand, if he suggests that there’s room for rate cuts, AUDUSD could tank.
The 4-hour chart of AUDUSD reveals what looks like a head and shoulders pattern with a skewed neckline. As you know, in forex trading this is considered as a bearish indicator. A break below neckline support around 0.6750 could mean that AUDUSD may soon revisit its yearly lows at 0.6670.Meanwhile, on the hourly chart, we can see that the currency pair is testing resistance around the falling trend line (connecting the highs of November 19, November 21, and November 25). A strong bullish close above the trend line could mean that it’s time to buy Australian dollars. There is near-term resistance at yesterday’s highs at 0.6798. If there are enough bids to push AUDUSD past it, the next resistance will be at 0.6813 where the currency pair hit highs on November 21.Download our latest quarterly market outlook for our longer-term trade ideas.