AUDUSD Technicals: The AUDUSD is correcting lower ahead of the RBA rate decision

The Reserve Bank of Australia (RBA) is widely expected to keep the Cash Rate unchanged at 3.6% when it announces its decision at 10:30 PM ET.. We won’t get the economic projections at this meeting, so the focus will be on the statement and the press conference. The expectations are for the central bank to remain cautious and acknowledge the risks around inflation, but a hawkish shift in stance is a risk.

RBA Governor Michele Bullock noted that inflation has recently surprised to the upside and that the economy has likely reached, or is very near, its potential growth limit, even though the exact size of the output gap remains uncertain. She said the labor market is still a bit tight and that some of the recent rise in trimmed-mean inflation may prove temporary, but the RBA is watching the latest inflation data very closely. Bullock emphasized that if inflation turns out to be more persistent than expected, it would have important implications for monetary policy going forward.

The AUDUSD has been trending higher since bottoming on November 21. The gains were fed by CPI inflation which came in at 3.8% vs 3.6% in the prior month. The price has moved from a low on November 21. 0.64206 to a high reached on Friday and approached today at 0.66488. The high today was at 0.6648. Since November 25 when the price broke above the 100 hour moving average (currently at 0.6610) and 200 day moving average, the price has stepped above the 200 hour moving average (currently at 0.6532), the 100 day moving average and the 50% midpoint and the 61.8% retracement of the move down from the September 17 high at 0.6563 and 0.6597 respectively.

The low price today reached 0.6615 just above the rising 100 hour moving average at 0.6610. Through the rate decision, moving below the 100 hour moving average and staying below would be step one. From there, the downside targets would include the:

• Broken 61.8% retracement at 0.65972
• The rising 200 hour moving average at 0.6573, and the
• 50% midpoint of the move down from the September high at 0.65635.

On the topside, the high price from Friday and today ahead 0.66488 would be the 1st target followed by the swing high going back to September 18 at 0.66588. Above that and traders will look toward the September 17 highs at 0.66888 and 0.6706 respectively.

The video above outlines the roadmap for traders through the key rate decision.