The Reserve Bank of Australia is anticipated to leave their cash rate target unchanged at 00:30 ET on Tuesday, after unexpectedly cutting the rate by 25 basis points to 3.00 percent last month. However, the Australian dollar may only respond to a surprise rate cut (Credit Suisse overnight index swaps are pricing in a 24 percent chance of a reduction) or a biased monetary policy statement.
After the central bank’s last meeting, RBA Governor Glen Stevens said, “The stance of monetary policy, together with the substantial fiscal initiatives, will provide significant support to domestic demand over the period ahead,” suggesting that further reductions were unnecessary. As a result, it will be important to look to Stevens’s statement, as signs that the RBA may consider cutting the cash rate target again eventually could weigh on the Australian dollar, while indications of a broadly neutral bias could support the currency.
Looking to AUD/USD, 0.7400 serves as immediate resistance, but the level could quickly be broken and price could target the psychologically important 0.7500 mark or the 61.8 percent fib of 0.8524-0.6007 at 0.7562 if the RBA leaves rates at 3.00 percent and issues a neutral policy statement. On the other hand, a 25 basis point cut could weigh AUD/USD back down toward Monday’s lows of 0.7242 or even the 200 SMA at 0.7177.
[I]Source: FXtrek IntelliCharts[/I]
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