The Australian Dollar looks teed up for another turbulent week. At its November monetary policy meeting on Tuesday, the Reserve Bank of Australia (RBA) board members slashed the official cash rate (OCR) to a record low of 0.10% from 0.25% previous, as widely expected. The RBA set its three-year bond yield target at 0.10%.
The central bank also announced an expansion to its asset purchases program, quantitative easing (QE), by AUD100 billion. The statement said, “The package includes the purchase of $100 billion of government bonds of maturities of around 5 to 10 years over the next six months.”
On the other hand, After trading within tight ranges for much of October, the greenback rose to a four-week high on Friday on fears the election results will be contested in the courts, along with economic damage from renewed lockdowns in Europe.
U.S. President Donald Trump’s “America First” trade policy torched a 70-year consensus on trade liberalization, drew a harder line against China’s state-driven economic model, and erected new tariffs on imported steel and aluminum, alienating allies. Trump is touting his efforts to protect American workers and a Phase 1 trade deal with China that promises to boost U.S. exports as closing arguments in Tuesday’s presidential election. This also added strength to the greenback,
Having witnessed initial reaction to the RBA’s monetary policy moves, AUD/USD traders will wait for Friday’s monetary policy statement for clear direction. Ahead of that, Governor Philip Lowe can also shed some lights on why the decision was taken, which in turn becomes an important event to watch. However, the immediate market attention will be on the US elections where the current President Donald Trump is trying to defy the polls suggesting a blue wave, a condition where the Democratic Party dominates in both the American houses.
AUD/USD 4 Hours Chart:
Support: 0.7012 (S1), 0.6968 (S2), 0.6946 (S3).
Resistance: 0.7079 (R1), 0.7101 (R2), 0.7145 (R3).
The RBA dovishness weighs on Aussie against greenback which has some strength due to optimism on the US election. We expect a bearish trend for AUD/USD.