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09:24, 05 февраля

Repelled from Resistance at 0.73 as RBA Meets

In the last few days the AUDUSD has run into a wall of resistance at the key 0.73 level which has repelled prices lower since. In the last week or so the AUDUSD has rallied well to move past the key 0.7150 level and reach a two month high around 0.73 before easing lower. The 0.7150 level has previously provided support to the AUDUSD and is likely to do so again should it be called upon.

Although it was only a couple of weeks ago that the AUDUSD moved lower to a three week low back within the range between 0.7050 and 0.7150. Just prior to the decline, the AUDUSD had done very well to rally from its lowest level in many years below 0.67 back up to above 0.7150.

The AUDUSD didn’t finish 2018 very well falling strongly throughout December to hit a three year low just below 0.7050 before dropping sharply down to below 0.67 and regaining lost ground just as quickly as it fell. In mid-December the AUDUSD enjoyed some much needed support from the 0.7150, after this level played a role in the last couple of months with the currency pair bouncing off this level several times, however this level gave way to immense selling pressure which saw the AUDUSD fall from near 0.74 to its multi year low.

Throughout November the 0.73 level provided a lot of resistance to the AUDUSD so it will be interesting to see how the AUDUSD responds should it continue its rally higher. Leading up to the four month high near 0.74 at the end of November, the AUDUSD had made some solid ground over a few weeks reversing from support at 0.7050 and moving higher. Just prior to this push higher the AUDUSD had been quite content to take a breather and enjoy solid support from 0.7050 as it has traded along that level for several weeks throughout October, although it did drop a little lower reaching a then 2½ year low during that time.

The Reserve Bank of Australia (RBA) will hold its first policy meeting for 2019 today when it is widely tipped to hold its record low cash rate at 1.5%, where it has remained since August 2016.  All 28 economists polled by Bloomberg expect the cash rate will be held steady today.  However more important than the rate decision, is the policy statement which is expected to have changed since their last meeting.  Except for Australia’s key commodity prices and the Australian labour market, there’s unlikely to be much for the RBA to be too excited about.  Expectations are shifting that the RBA's next move may have to be down as financial markets now believe there’s a greater than 50% chance that the cash rate will be lowered by 25 basis points by the end of this year.  Another major issue that the RBA will consider is housing price declines across most capital cities, which have accelerated in recent months.  New home building permits have bucked predictions and fallen for the second month to a new five-and-a-half year low, as credit tightens and Australian house prices continue to slide.  The Australian Bureau of Statistics reported that December's seasonally adjusted 8.4 per cent decline in building and renovation approvals continues November's slide, with approvals now down 22.5 per cent over 12 months.