AUDUSD - Bearish on RBA Inflation Forecast

AUDUSD, Daily    

The RBA cut its forecast for underlying inflation in 2016 to 1-2% from 2-3% in the Statement on Monetary Policy. The Bank’s forecasts for growth and the labour market were little changed from the February Statement on Monetary Policy. Further rate cuts look likely this year amid increased risk that inflation expectations remain persistently lower for longer than the Bank currently expects. AUDUSD fell 0.8% to 0.7400 from 0.7460 as the Australian dollar lost value against the U.S. dollar following the release of the Statement.

I last updated the AUDUSD pair April 27th before the RBA meeting last week and the rate cut and last night’s reduction in the inflation target. My headline then was  “Australia Where  has the inflation gone?” yesterday’s announcement  cemented my thoughts. I also suggested that the 0.7450 level was a key support level; this was robustly and significantly broken in the last 24 hours.

Technically we now have Daily support and downside Target 1 at 0.7330 – the 50% Fib level, which also coincides with the Weekly retracement levels.  Further down we have 200 DMA, support and Target 2 at 0.7260.  The monthly chart turned down during April and shows support at 0.7050 and 0.7000.