The Australian dollar initially traded lower following the dovish RBA statement. The Board judged that holding the stance of monetary policy unchanged at this meeting would be consistent with sustainable growth in the economy and achieving the inflation target over time. The RBA also reiterated that an appreciating exchange rate would complicate this adjustment.
The statement noted that Australia inflation remains quite low. It also reiterated that headline inflation is expected to pick up over the course of 2017 to be above 2%. RBA Governor Lowe stated that more home loan curbs would be considered if needed and that longer housing trends persist.
The Australian dollar daily chart displays that the bearish drop ended after both respecting the 200-day SMA and a potential bullish Gartley pattern. Point D is targeted with the 78.6% Fibonacci retracement level of the X to A leg and the 141.4% Fibonacci expansion level of the B to C move. If we see price have a daily close below the 50-day SMA, which currently trades around the .7631 level, we could see a major leg higher target the .7750 region. If bearishness returns, key support will come from the .7500 handle.
The trade: Buy AUD/USD at .7525, with a stop loss at .7475 and take profit at .7675. The risk/reward ratio is 1:3