The Australian dollar had a fall on Tuesday after the RBA’s move. The Reserve Bank of Australia (RBA) board members announced no changes to the official cash rate (OCR), leaving it at a record low of 0.1% during their November monetary policy meeting. The board made a decision to discontinue the target of 10 basis points for the April 2024 Australian government bond. The board decided to continue to purchase government securities at the rate of $4 billion a week until at least mid-February 2022.

After the central bank’s monetary policy decision announcement, The Reserve Bank of Australia (RBA) Governor Phillip Lowe said “The yield target has been effective and has supported the recovery of the Australian economy.

But its effectiveness as a monetary policy tool declined as expectations about future interest rates shifted due to the run of data and the forecast progress towards our goals.”

Ray Attrill, FX strategist at National Australia Bank in Sydney said that “The RBA have made every effort to sound dovish” in the policy statement, “so in that sense there’s clearly an attempt to push back on market pricing.” “The risk is that we could see some further slippage in the Aussie dollar near term.”

Along with the RBA move, market’s cautious mood ahead of central bank events and mixed market sentiment weigh on the risk appetite and thus favors the US dollar’s safe-haven demand. The market anxiety could also be witnessed by mildly offered stock futures despite the firmer Wall Street closing and sluggish US Treasury yields.

Moreover, an appeal from China’s Ministry of Commerce to ensure food supplies in winter also poses a challenge in the market sentiment. Additionally, easing prices of Australia’s main export item, iron ore drags the AUD/USD price.

AUD/USD 4 Hour Chart:

Support: 0.7491 (S1), 0.7463 (S2), 0.7441 (S3).

Resistance: 0.7541 (R1), 0.7563 (R2), 0.7591 (R3).

RBA’s dovish stance pressurizes Aussie and we expect a bearish trend for AUD/USD.