Price threatens a break below the 100-day moving average
The RBA's shift to a more neutral stance is the highlight of the trading day so far and that has prompted a more than 1% drop in AUD/USD as we move towards European trading. The pair continues to sit at the lows for the day as sellers have regained near-term control and now look to threaten a further downside break.
Price is hovering below the 100-day MA (red line) now and if sellers can hold a break below that, it could potentially open up a move back towards testing lows seen on 24 and 25 January around 0.7075-85 before further support is then seen closer towards 0.7000.
I don't believe the RBA is going to turn full dovish and err towards rate cuts in the near future but this basically rules out odds of a rate hike this year (not like it was ever present in the first place). The RBA was always seen as holding rates steady since the beginning of last year and I wouldn't expect that to drastically change unless the economy craters, which it shouldn't despite worries seen in household debt and the housing market.
There's scope for further weakness in the Australian dollar moving forward but Lowe's message today isn't going to be something that is too lasting since markets were never convinced of a move to hike rates by the RBA anyway.
All this does is that it puts further emphasis on economic data so that will come under heavy scrutiny as to whether or not the RBA is closer towards siding with a rate cut down the road. Lowe made a case on that by hinting at changes in labour market and inflation data, so keep an eye on those two in particular in the coming weeks.
