Aussie Looks Bullish Ahead of RBA Minutes

The Reserve Bank of Australia will release the last meeting minutes early on Tuesday and will be scrutinized by Aussie traders. In the last RBA policy meeting, the central bank kept the interest rates unchanged at 1.5% and appeared generally and surprisingly optimistic for the economy. They attributed the contraction of the economy in the Q3 to temporary factors, and expressed its perspective for a higher figure in Q4 (GDP Growth was -0.5% quarter-over-quarter in Q3). They also commented that the low inflation was as expected and will return to target over time. Australian CPI was below 1.5% yearover- year in 2016.

The minutes tonight will unveil if the policymakers are as confident as they showed in the monetary policy statement published with the interest rate decision. However, the traders will scrutinize tonight's report to gauge how it will affect the domestic currency. RBA repeatedly expressed its desire for a weaker currency but they have not paid much attention to this so far. If the economy performs well, there will not be a reason to push the currency's exchange rate lower. But, if the economy starts to weaken, a lower Australian dollar versus the majors may be needed to stimulate the economy.

AUD/USD – Technical Outlook with Forecast

On a long-term basis, the AUD/USD is developing within a trading range over the last year with lower boundary the 0.7160 support level and upper boundary the 0.7780 resistance barrier. However, since January, the Aussie was traded sharply higher against the U.S. dollar following the rebound on the 0.7160 strong obstacle. Also, it surged more than 6% and recorded a fresh three-month high at 0.7730.

Going to a lower timeframe, the commodity pair moved slightly lower after it challenged the aforementioned new high. Our expectation is a further bullish movement until the latter level or until the next resistance at 0.7780. An alternative scenario is a downward move until the 0.7605 support handle and then back to the previous resistance level. Otherwise, if the price slips below the 0.7605 barrier, it would open the way for the 200-daily SMA near the 0.7540 price level. Technical indicator seems to confirm the upside momentum as the RSI is sloping upwards. In addition, the moving averages are bullish as the 50-SMA just crossed above the 100-SMA.