This article is originally referred from FXNet Fundamental Analysis
Fresh offers emerged for the AUDUSD pair following RBA’s rate cut decision, sending the rate briefly below 0.75 handle, before recovering some ground to swing back above the last.
Currently, the AUD/USD pair drops -0.34% to 0.7513, heading for a retest of 0.75 handle. The Aussie’s recovery from a knee-jerk downward spike to 0.7492 faltered near 0.7535 region, as the bears tightened grip amid a widely anticipated rate cut decision by the RBA this Tuesday. The RBA slashed its official cash rate by 25 bps to a record low of 1.5%. However, limited reaction is witnessed in the major, as such a move was widely expected by markets in wake of dwindling economic growth, mixed labour market and rising AUD. Moreover, dismal Australian trade and building consents data also continue to weigh on the Aussie. The Australian trade balance for June stood at -3.195 bn versus expected -2bn and prior -2.218bn. While the Building approvals data for June came in at -2.9% m/m vs. expected +0.8% and -5.2% last.
Markets will digest the RBA policy decision, with focus now shifting towards the US economic releases due later in the NA session for fresh momentum.
The pair finds the immediate resistance at 0.7552 (5-DMA) above which gains could be extended to the next hurdle located at 0.7600. On the flip side, the immediate support located at 0.7485/66 (50 & 100-DMA). Selling pressure is likely to intensify below the last, dragging the Aussie to 0.7450.
The dollar hovered near three-week lows on Tuesday after soft U.S. economic data undermined the case for an early Federal Reserve rate hike while theAustralian dollar braced for the probability of a policy easing later in the day.
The dollar index against a basket of six major currencies stood at 95.758, having fallen to as low as 95.384 last week when it posted its biggest fall in three months.
The index has struggled to stage a meaningful recovery since after the release of very weak U.S. gross domestic product growth for the June quarter late last week.
Weaker-than-expected manufacturing data released on Monday continued to hold the greenback down. The influential Institute for Supply Management’s (ISM) index of national factory activity dropped to 52.6 in July from 53.2 in June, below market expectations of 53.0.
Fed funds futures are pricing in less than a 40 percent chance of an interest rate hike by December.
Against the yen, the dollar changed hands at 102.40 yen, near its three-week low hit on Friday after the Bank of Japan disappointed markets with a less aggressive than expected easing.
Japanese Prime Minister Shinzo Abe is also due to formerly unveil his economic package on Tuesday, which is expected to include 7.5 trillion yen of fiscal spending, though this is not expected to affect the yen much.
“The size and rough contents of the package are already known so I doubt it will move markets. The dollar/yen is likely to fall unless there are clearer signs of a rate hike by the Fed,” said Shinichiro Kadota, senior FX and rates strategist at Barclays Securities Japan.
The euro traded at $1.1165, having moved little so far this week.
Original Source: FXNet Fundamental Analysis