The Reserve Bank of Australia cut interest rates by 0.25% during their monetary policy statement today and, judging from AUD/USD’s reaction, this was expected by most market participants.
However, a rate cut is still a rate cut. In comparison to the Fed which is looking to reduce stimulus soon, the RBA is still more dovish, which could mean that AUD/USD could continue to trend lower.
A short trade around the .9000 to .9050 former support area could be a good entry. Aiming for the recent lows or for new lows with a 50-pip stop would yield a high reward-to-risk ratio. Stochastic isn’t in the overbought region yet, which suggests the pair could pull up higher before resuming its drop.
By Kate Curtis from Trader’s Way.