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  • The Reserve Bank of Australia (RBA) lowered policy rate by 25 basis points as expected.
  • The RBA also left the door open for further rate cuts.
  • US Dollar Index continues to push higher on Tuesday.

After spiking to a session high of 0.6766 with the initial reaction to the Reserve Bank of Australia’s (RBA) monetary policy announcements during the Asian trading hours, the AUD/USD pair made a sharp U-Turn and slumped to its lowest level in four weeks at 0.6694. As of writing, the pair was trading near the 0.6700 handle, erasing 0.75%, or 50 pips, on a daily basis.

The RBA adopts a dovish stance to weigh on the Aussie

As expected, the RBA on Tuesday announced that it cut its policy rate by 25 basis points to 0.75%. In its policy statement, the bank said that it was reasonable to expect an extended period of low rates and reiterated that it will ease the policy rate further if needed.  

Commenting on the monetary policy outlook,  RBA  Governor Phillip Lowe  noted that the main issue for the economy at the moment was geopolitical uncertainty, particularly the United States (US) – China trade dispute.

Assessing the RBA’s announcements,  “Consistent with the cut, the commentary in the post-meeting statement was more dovish and leaves open the way for further rate cuts,” said Felicity Emmett, senior economist at ANZ.

“We think the  RBA  will ease again, with the evolution of the data and global central bank decisions important in determining the timing of the next cut.”

On the other hand, ahead of the critical Purchasing Managers’ Index (PMI) data releases from the US, the US Dollar Index is preserving its strength to further weigh on the pair. At the moment, the index is moving sideways near the mid-99s, a little below the multi-year high that it set at 99.59 earlier in the day.

Technical levels to watch for