RBA minutes preview - what to expect in AUD/USD?

AUD/USD was supported on a better risk mood in the US afternoon, albeit led by an intra-session spike in gold prices. For the day ahead, we turn to the RBA minutes for April.

AUD/USD start of week price action

The Aussie brushed off the Chinese data misses from late Friday and after the US close. AUD/USD rebounded from 0.7244 lows overnight and back above the 200 dma at 0.7257. Industrial metals and oil were all performing and Wall Street finished modestly higher.

Looking at the correlations: "Consistent with the an ongoing shift in global sentiment to a more risk-averse environment (which has seen Chinese stocks decline last week), the correlation of AUD/USD and the Hang Seng stock index entered into the top 10 list of positive correlations," explained analysts at Nomura - So one to keep an eye on as we progress within this bearish reversal. 

RBA minutes to weigh on the Aussie?

For the day ahead in Asia, apart from Chinese risk, we have the RBA minutes for April and from when rates were cut by 25bps. These will be released at 11:30am Syd/9:30am Sing/HK. "These minutes ought to read with a clear a dovish bias," argued analysts at Brown Brothers Harriman who added, "A rate cut at the next RBA meeting, on June 7, may be too soon to anticipate a follow-up rate cut, but the minutes will be looked at for clues."

Analysts at Westpac suggest that the main focus will be the discussion on inflation, for any hint of just how worried the Board is about the impact of “very subdued growth in labour costs and very low cost pressures elsewhere in the world”."

RBA minutes: what markets are looking out for - Westpac

AUD/USD levels to monitor

To the downside, the AUD/USD breached the 200 dma at 0.7257 without much resistance from the bulls and a dovish outlook and/or jawboning of the Aussie should see fresh lows within this bearish reversal and we are just 44 pips above that level at time of writing. 0.7192 is the high for 29th Feb where five days of straight gains were recorded within the 2016 reversal. A break below there opens the lows of the double top's subsequent sell-off at 0.7110 formed on 25th Feb.

To the upside, the 20 sma on the 4hr sticks at 0.7300 could give way for a test of the 11th May highs of 0.7398 on a continuation through the 100 dma at 0.7338. The 4hr 50 sma has not been challenged yet by the bulls since the sell-off on 2nd May and after the RBA cut rates to record low, so it could also prove a tough resistance at 0.7347 currently.