AUD Bears Get Squeezed As RBA Hold Rates

Article By: ,  Financial Analyst

After much anticipation, the RBA opted to hold rates at 1.5%, making it the 30-consecutive meeting without a change of policy since lowering rates to record lows. That doesn’t mean they’re out of the woods yet though.

Looking at the differences between the April and May statement, the RBA continue to remain optimistic over employment and for this to see wages pick-up, albeit at a slower pace than expected. As inflation was ‘noticeably lower than expected’ it’s prompted them to lower their ‘central scenario’ for underlying inflation once more to 1.75% in 2019 (2% prior) and 2% in 2020 (2.25% prior). Ultimately means the next two employment reads are of vital importance as they’ll appear ahead CPI. Citing a ‘steady unemployment rate’ and ‘significant increase in employment’, it could be the latter figure we need to watch more closely for signs of fatigue.


Summary of RBA’s May 2019 statement:

  • Risks (for global economy) are tilted to the downside
  • See's AU growth around 2¾ per cent in 2019 and 2020
  • Labour market remains strong (significant employment increase)
  • UE expected to decline to 4.75% by 2021
  • Lowered CPI forecasts for 2019 and 2020
  • CPI for Q1 noticeably lower than expected
  • Paying close attention to employment at its upcoming releases


With RBA erring on the side of caution, Aussie bears got squeezed which saw AUD strengthen across the board and safely become the strongest major of the day. As noted in Monday’s COT report, bears added 10.3k fresh shorts ahead of today’s RBA meeting which dragged the net-exposure to its most bearish level since early November. Given short exposure was rising into expectations of a rate-cut, failure for RBA to do so could result in a large spike higher and this is clearly what we’ve seen today.


As a result, AUD/USD is enjoying its most bullish session since the 1st February and has blown past 70c. At current levels AUD/USD appears set to close with a morning star reversal pattern back above key support and warn of yet another fakeout. A break above 0.7070 signals further upside potential with around 130 pips to the upside before we hit the 72c highs.


It appears AUD/NZD has carved out its corrective low and we now look for it to retest (and break) the 1.0732 highs. Support was found around the 50-day eMA, 38.2% Fibonacci retracement level and the 1.0545 highs and today’s bullish range expansion broke easily above the 200-day eMA. Given the clear trend structure, we suspect this one could move quite fast if RBNZ cut rates tomorrow as expected.


The information on this web site is not targeted at the general public of any particular country. It is not intended for distribution to residents in any country where such distribution or use would contravene any local law or regulatory requirement. The information and opinions in this report are for general information use only and are not intended as an offer or solicitation with respect to the purchase or sale of any currency or CFD contract. All opinions and information contained in this report are subject to change without notice. This report has been prepared without regard to the specific investment objectives, financial situation and needs of any particular recipient. Any references to historical price movements or levels is informational based on our analysis and we do not represent or warranty that any such movements or levels are likely to reoccur in the future. While the information contained herein was obtained from sources believed to be reliable, author does not guarantee its accuracy or completeness, nor does author assume any liability for any direct, indirect or consequential loss that may result from the reliance by any person upon any such information or opinions.

Futures, Options on Futures, Foreign Exchange and other leveraged products involves significant risk of loss and is not suitable for all investors. Losses can exceed your deposits. Increasing leverage increases risk. Spot Gold and Silver contracts are not subject to regulation under the U.S. Commodity Exchange Act. Contracts for Difference (CFDs) are not available for US residents. Before deciding to trade forex, commodity futures, or digital assets, you should carefully consider your financial objectives, level of experience and risk appetite. Any opinions, news, research, analyses, prices or other information contained herein is intended as general information about the subject matter covered and is provided with the understanding that we do not provide any investment, legal, or tax advice. You should consult with appropriate counsel or other advisors on all investment, legal, or tax matters. References to FOREX.com or GAIN Capital refer to StoneX Group Inc. and its subsidiaries. Please read Characteristics and Risks of Standardized Options.

Please note that foreign exchange and other leveraged trading involves significant risk of loss. It is not suitable for all investors and you should make sure you understand the risks involved, seeking independent advice if necessary.

The products and services available to you at FOREX.com will depend on your location and on which of its regulated entities holds your account.

FOREX.com is a trading name of GAIN Global Markets Inc. which is authorized and regulated by the Cayman Islands Monetary Authority under the Securities Investment Business Law of the Cayman Islands (as revised) with License number 25033.

FOREX.com may, from time to time, offer payment processing services with respect to card deposits through StoneX Financial Ltd, Moor House First Floor, 120 London Wall, London, EC2Y 5ET.

GAIN Global Markets Inc. has its principal place of business at 30 Independence Blvd, Suite 300 (3rd floor), Warren, NJ 07059, USA., and is a wholly-owned subsidiary of StoneX Group Inc.

© FOREX.COM 2024