AUD/USD rallied ahead of RBA

AUDUSD retraced all of Friday’s losses in printing a high at 0.6075.  The signs that lockdown measures are having an impact helped to stabilise sentiment overnight. However, President Trump’s statement that he sees signs that the pandemic is beginning of level off in the US, prompted a rally in Asian stock markets that left the JPN225 up 4.2, weighed on Yen, which has seen is safe-haven premium unwind. Hence commodity currencies such as Aussie rally amid Yen’s decline and US Dollar’s softness.

In Australia meanwhile, the RBA meets tomorrow but no action is expected given their aggressive easing moves in March. The RBA cut 25 bps to a record low 0.25% in an unscheduled move on March 18, part of a “comprehensive package to support the Australian economy through this challenging period.” Yield targeting and term funding will be employed in order to support the economy and financial system. Hence as we are expecting a “flat” and on hold RBA tomorrow, the statement is unlikely to surprise markets in way shape or form and should not generate very much AUD volatility.

The AUDUSD touched today, Friday’s peak but also a breath away from the Upper line in the near term regression channel formed since its drop from 0.6212, breaking outside the Bollinger Band pattern in the 1-hour chart.

According to the momentum indicators, in the near term the asset’s bullish momentum looks to running out of steam. The RSI is turning lower from 65 peak, Stochastic confirmed a bearish cross in the overbought area while the MACD is heading northwards however its signal line holds below zero. In contrast, the intraday 10- and 20-hours EMA are moving aligned higher suggesting further intraday gains.

In case of a bounce off the upper channel line (0.6075),  the price could challenge the 50% Fibonacci retracement level (0.6092) of the drift from 0.6685, and the R2 at  0.6111. A strong close above the latter tonight could turn the focus to March 31 peak (0.6214) and to 61.8% Fib. level (0.6230).

In summary, daily picture remains bearish with lower highs being developed and momentum indicators negatively configured. Near term picture had turned positive in the Asia session,  suggesting further gains intraday however these gains looks to be temporary and limited as the intraday bullish momentum has started  falling.