Never miss a story from David Song

Subscribe to receive daily updates on publications
Please enter valid First Name
Please fill out this field.
Please enter valid Last Name
Please fill out this field.
Please enter valid email
Please fill out this field.
Please select a country

I’d like to receive information from DailyFX and IG about trading opportunities and their products and services via email.

Please fill out this field.

Your Forecast Is Headed to Your Inbox

But don't just read our analysis - put it to the rest. Your forecast comes with a free demo account from our provider, IG, so you can try out trading with zero risk.

Your demo is preloaded with £10,000 virtual funds, which you can use to trade over 10,000 live global markets.

We'll email you login details shortly.

Learn More about Your Demo

You are subscribed to David Song

You can manage your subscriptions by following the link in the footer of each email you will receive

An error occurred submitting your form.
Please try again later.

Australian Dollar Talking Points

AUDUSD appears to be making another run at the May-high (0.7061) as the exchange rate extends the series of higher highs and lows from the previous week, and the Reserve Bank of Australia (RBA) Minutes may fuel the recent rebound in the Australian Dollar should the central bank tame speculation for another rate cut in 2019.

AUDUSD Rate to Target May High on Less Dovish RBA Minutes

AUDUSD extends the rebound from the monthly-low (0.6911) even though China, Australia’s largest trading partner, marks the slowest pace of growth since record keeping began in 1992, and the current environment may keep the exchange rate afloat as the Federal Reserve is widely expected to deliver an “insurance cut” at the next interest rate decision on July 31.

Image of Fed Fund futures

The Federal Open Market Committee (FOMC) appears to be on track to insulate the US economy as “many participants indicated that the case for somewhat more accommodative policy had strengthened,” and the US Dollar may face a more bearish fate over the coming days as Fed Fund futures show a 100% probability for at least a 25bp reduction in the benchmark interest rate.

In contrast, the RBA may show a greater willingness to revert back to a wait-and-see approach after delivering two consecutive rate cuts, and the central bank may strike a more balanced tone ahead of next meeting on August 7 as “the central scenario for the Australian economy remains reasonable.”

Image of RBA interest rate decision

Keep in mind, the RBA is likely to reiterate its pledge to “adjust monetary policy if needed” as the US and China struggle to reach a trade deal, but it seems as though the central bank is in no rush to extend its rate easing cycle as “the central scenario remains for underlying inflation to be around 2 per cent in 2020 and a little higher after that.

As a result, the RBA minutes from the July meeting may ultimately fuel the recent rebound in AUDUSD, with the exchange rate at risk of making another run at the May-high (0.7061) should Governor Philip Lowe and Co. soften the dovish forward guidance for monetary policy.

Sign up and join DailyFX Currency Strategist David Song LIVE for an opportunity to discuss potential trade setups.

AUD/USD Rate Daily Chart

Image of audusd daily chart
  • The AUDUSD rebound following the currency market flash-crash has been capped by the 200-Day SMA (0.7091), with the exchange rate marking another failed attempt to break/close above the moving average in April.
  • In turn, the broader outlook for AUDUSD remains tilted to the downside, with the exchange rate still at risk of giving back the rebound from the 2019-low (0.6745) as both price and the Relative Strength Index (RSI) continue to track the bearish formations from late last year.
  • More recently, the advance from June-low (0.6832) appears to have stalled ahead of the May-high (0.7061), but the string of higher highs and lows in the exchange rate raises the risk for a larger rebound.
  • Need a break of the May-high (0.7061) to open up the Fibonacci overlap around 0.7080 (61.8% retracement) to 0.7110 (78.6% retracement), with the next topside hurdle coming in around 0.7180 (61.8% retracement).
  • However, another failed attempt to test the May-high (0.7061) may bring the downside targets back on the radar, with a move below 0.7020 (50% retracement) raising the risk for a move back towards the 0.6950 (61.8% expansion) to 0.6960 (38.2% retracement) region.

Additional Trading Resources

Are you looking to improve your trading approach? Review the ‘Traits of a Successful Trader’ series on how to effectively use leverage along with other best practices that any trader can follow.

Want to know what other currency pairs the DailyFX team is watching? Download and review the Top Trading Opportunities for 2019.

--- Written by David Song, Currency Strategist

Follow me on Twitter at @DavidJSong.