09:07, 02 October

Settles above 0.72 Before RBA Meeting

In the last week or so the AUDUSD has eased slightly back to trading just above 0.72 after reaching a four week high above 0.73 in the last week. A couple of weeks ago the AUDUSD rested on support at the current key level of 0.7150, despite its best efforts to rally higher above 0.72 which were sold off strongly every time returning it to 0.7150. It only recently fell through this level reaching its lowest level in 2018 around 0.7085 and was well supported with buyers jumping in at these low levels. The last time the AUDUSD was this low, it bounced off the 0.7150 level very strongly and moved over 500 pips in a couple of weeks. Up until this recent drop the AUDUSD had been quite content to trade around 0.74 and it previously made a few attempts to break through the resistance at 0.75, however, all of these were thwarted.

During this period, the significant level at 0.75 loomed like a dark cloud. This same level has previously propped up the currency pair before being broken strongly mid-June. Throughout June the AUDUSD has dropped very sharply from one month high above the key 0.7650 level down to a new 12 month low around 0.7310. In a couple of weeks prior to this sharp drop, the AUDUSD has enjoyed some much-needed support from the key 0.75 level. It was only in early May that the AUDUSD was trading below this level and looking poised to continue much lower, so it did well to rally higher and get back above the 0.75 level.

Throughout the last couple of years the AUDUSD has traded within reasonably tight ranges of up to six cents, and in the last nine months or so we have seen it push higher to its highest levels in more than two years above 80 US cents. The 80 cents level, however, has provided a significant obstacle to the AUDUSD as it has met resistance there since the middle of 2017. Repeated attempts to push through the key 80 cents level were short-lived and the AUDUSD quickly sold off moving it lower down to its current levels.

The Reserve Bank of Australia (RBA) will meet again today for their monthly board meeting to discuss their monetary policy decision. Last month they kept the nation's official cash rate at the record-low level of 1.5% for an incredible 25th straight meeting – no one is expecting the RBA to move this month."There will be no change for the Reserve, they'll leave rates as is for another month," CommSec chief economist Craig James said. House price data is also due to be released on Tuesday and would likely show an unsurprising drop in prices, he said."It's everyone's favourite dinner party topic but the double-digit annual gains in cities like Melbourne and Sydney couldn't be sustained and it's coming back down to earth," Mr James said. The AMP’s chief economist, Dr Shane Oliver noted that while recent economic growth and jobs data has been good, “we are still waiting for inflation and wages growth to pick up and the slide in home prices risks accelerating as banks tighten lending standards which in turn threatens consumer spending and wider economic growth. As a result, it would be dangerous to raise rates and we don’t see the RBA hiking until 2020 at the earliest and still can’t rule out the next move being a cut.” he wrote at the weekend