The Australian dollar fell sharply against all major currency pairs after the Reserve Bank of Australia (RBA) hinted that it could maintain a record-low interest rate environment going forward. Within the RBA monetary policy minutes, the central bank expressed that protracted spare capacity in the labor force is an ongoing problem.
“What was most notable out of the minutes was that there was a little bit more commentary around the labor market, highlighting that, while we have seen some better jobs numbers recently, there is a lot of spare capacity,” said Sean Callow, a senior FX strategist at Westpac Banking. Callow continued to say the result would leave wages soft, and this is dampen any hopes for higher interest rates.
The policy minutes indicated that growth still remains sub-par and will likely continue to be below expectations throughout the next few quarters. “The current accommodative stance of policy was likely to be appropriate for some time yet,” according to the policy minutes statement. The benchmark rate remains at 2.5 percent.
AUDUSD fell following the RBA statement, breaking through .9300, but momentum quickly picked up during the start of London trade. Price action is currently testing the daily 200 EMA at .9263. A close below this dynamic support level, price action should attempt to retest stronger support near .9200.
If support holds, traders could look for a pullback to .9320. Tonight, the Westpac consumer sentiment and the wage price index will report, both are mild-volatility events.