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AUD/USD Ignores RBA in Favor of Risk Trends, Losses May Resume

AUD/USD Ignores RBA in Favor of Risk Trends, Losses May Resume

Megha Torpunuri, Contributor
  • Australian Dollar gained slightly against the greenback as the RBA left OCR at 1.50%
  • AUD/USD prices testing February 2018 descending trend line, bearish reversal ahead?
  • Risk aversion, Australia 3Q GDP, and November US employment data in focus next

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The Australian Dollar was cautiously higher against its US namesake after the Reserve Bank of Australia maintained its overnight cash rate at 1.50%, as expected. The central bank noted that its unchanged policy is consistent with meeting its two percent inflation target over time, as well as sustainable growth. The monetary policy authority also stated that it sees a pick-up in global core inflation and that low rates continue to support the Australian economy.

AUD/USD Chart (5-minute)

AUD/USD Chart (5-minute)

Chart prepared in TradingView

The slight uptick in prices may continue AUD/USD’s recent rally on news of a US-China trade truce. An invalidation of the descending February 2018 trend line may serve as further confirmation to traders. However, negative RSI divergence indicates that positive momentum may be ebbing, while interest rate differentials and slowing Australian growth could signal a resumption of the dominant year-long downtrend.

AUD/USD Chart (Daily)

AUD/USD Chart (Daily)

Chart prepared in TradingView

Looking ahead, the sentiment-linked unit will continue to closely eye risk trends. AUD/USD may face losses as risk aversion takes center stage in the wake of an inverted Treasury yield curve and a dip in 10-year bond yields below the 200-day moving average. In addition, the Aussie will also be closely eyeing the release of the year-on-year local 3Q GDP figure, which is expected to decrease to 3.3% from the 3.4% prior. November’s US unemployment rate and change in non-farm payrolls may also bring volatility for the currency pair.

AUD/USD Trading Resources

--- Written by Megha Torpunuri, DailyFX Research Team

DailyFX provides forex news and technical analysis on the trends that influence the global currency markets.