Today, in its Monetary Policy Statement, RBA lowered the forecasts for Unemployment and GDP rates but raised the medium term forecast for inflation rate. Earlier, on Tuesday, RBA kept the interest rate at the same level of 2% and switched to neutral stance towards further rate cut.
The US interest rate rise may keep the RBA from further lowering of its interest rate, and the pair may fall naturally.
The market remains flat while waiting for the Non-farm Payrolls release. The statistics will determine the USD dynamics until the month end. Only if the actual data comes much worse than expected (+222 K), the US currency may fall sharply, as market participants will close profitable positions at the end of the week.
Support and resistance
The correction stopped at 0.7395 (EMA144 on the 4-hour chart). The pair is trading down to the year lows of 0.7240. If the downward trend develops, the pair may further fall to 2006 lows (0.7100-0.7000).
The level of 0.7200 is the strong resistance level, as many economists consider it to be the “fair” price for the pair. When this level is broken through, the pair may rebound or consolidate.
Nevertheless, OsMA and Stochastic on the 4-hour and daily charts have turned into long positions, indicating the possibility of the further correction. Targets may be 0.7395 (ЕМА144), 0.7435 (ЕМА200 on the 4-hour chart), 0.7500 (ЕМА50 on the daily chart). The breakout of 0.7590 would lead the pair towards 0.7770, 0.7900.
Support levels: 0.7200, 0.7240, 0.7320.
Resistance levels: 0.7400, 0.7435, 0.7500, 0.7530, 0.7590.
Open short positions and Sell Stop orders from 0.7340 and Sell Limit orders from 0.7450,0.7500 with targets at 0.7240, 0.7200 and further at 0.7100, 0.7000 (2006 lows). Set stop-loss at 0.7550.
Open long positions if the price consolidates above 0.7590 (with appropriate indicators signals on the daily and 4-hour charts).