AUD/USD is testing its 200-hour moving average
As the market is starting to adjust to the recent bias by the RBA that they plan to keep rates unchanged due to “long lags” in the transmission of monetary policy, the aussie is trying to keep higher after the policy decision on Tuesday.
AUD/USD is holding above the 100-hour MA (red line) after the bounce above 0.6700 and is now challenging the 200-hour MA (blue line) @ 0.6741.
If buyers can break above that, the near-term bias will turn more bullish once again.
Looking at the bigger picture:
There is still much work to be done for the pair to keep any solid upside momentum with there being minor resistance at 0.6754 before looking towards the 0.6800 handle next.
From a fundamental perspective, despite the RBA trying to commit to keeping rates steady for as long as they can – to try and avoid reaching the lower-bound of 0.25% – it looks like it will only be a matter of time before they will have to act.
The risk is that they don’t act fast enough and fall into the inflation trap and be forced into more unconventional policy measures down the road. That is a lesson that they should have well learnt when they were late to react as seen last year already.
But as long as the rates market continues to see the case for lower rates (although, there is a bit of an uptick recently), the aussie will find little room to track back higher as yields continue to be the key driver in AUD/USD: