AUD/USD looks poised to recover

Aug 6

Overnight, the Reserve Bank of Australia acknowledged potential risks to the downside but overall, the policy statement suggests a greater concern with the possibility of inflation remaining elevated than with any shortfalls in economic activity. Cash rate futures currently indicate a roughly 90% probability of a 25-basis point rate cut by the meeting on December 10. That is way less than what the markets are pricing in for the US Federal Reserve, which raises the question why the AUD/USD is not rising? Well, I think it is a matter of time and is contingent on risk appetite improving after what has been a bruising week. But that hammer candle from yesterday and today’s mildly bullish PA suggests that a rebound could be on the cards as we head deeper into the week.

By Fawad Razaqzada, market analysts at FOREX.com