Aussie tumbles following dovish RBA meeting minutes
The meeting minutes from the October Reserve Bank of Australia interest rate decision showed that the central bank was prepared to ease monetary policy further in order to promote job growth and also bring back inflationary pressures to the Australian economy.
The Australian Dollar moved sharply lower against the U.S Dollar following the release of the RBA meeting minutes, as the minutes clearly showed that a dovish tone was being upheld by RBA members. Market participants now fear that the central bank could cut rates again at the November monetary policy meeting if employment and inflation remain muted.
The RBA meeting minutes confirmed that the recent decision to cut interest rates by twenty-five basis points was a contentious issue, as some RBA policy members suggested that another cut could risk over-inflating house and asset prices. However, the central bank deemed a rate cut necessary to manage increasing downward pressure on inflation and jobs.
RBA members also noted that reducing the interest rate even lower may have a limited impact, given that the central bank has recently embarked on an aggressive cycle of interest rate cuts. The Reserve Bank of Australia also remained cautious about sending out any hawkish signals to financial markets, as they clearly have a bias towards a lower Australian Dollar exchange range.
The Australian Dollar has recently enjoyed a multi-week rally against the greenback, after sinking to levels not seen since March 2009 earlier this month. Optimism over the recently announced Sino-U.S trade deal and hopes that the RBA may not cut interest rates again in 2019 have largely driven the rally in the AUD/USD pair.
AUD/USD Daily Candlestick Chart | Source: ActivTrader
The Australian dollar has rapidly moved away from the $0.6800 resistance level against the U.S Dollar, as traders book profits from the recent reversal from the $0.6660 area. Going forward, major resistance is found at the $0.6850 and $0.6920 levels, while key support is located at the $0.6710 and $0.6690 levels.
Written by Nathan Batchelor, External Analyst, ActivTrades
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