AUD/USD fell during the session on Monday as the “risk off” trade came back. The fears of recession now are back out there as the Spanish situation continues to deteriorate. Because of this, risk assets in general fell for the session, and the Aussie dollar wasn’t any different. The pair retreated to the 1.04 level, but more importantly the 200 day EMA.
The session sees a Reserve Bank of Australia rate decision, and the market seems to be pricing in a .25 percent cut. There are some people that believe a .50 percent cut is in store, and as a result the pair may have been beat up a bit too much lately. The general consensus is that the .25 percent cut will be the result. If we get a .50 percent cut, there could be further selling. However, as a general rule, we prefer buying this pair once the decision is out if it is indeed a .25 percent cut. Obviously, if they don’t cut at all – this would be a buy signal as well.
There will more than likely be a knee-jerk reaction to sell on the cut, but it should simply prove a buying opportunity in the end.