Aussie falls sharply after soft rhetoric from RBA

Australian dollar accelerated to one-week low on Tuesday, extending pullback from June 16 peak at 0.6899 into third consecutive day.

Fresh drop on Tuesday (1.2% down by early US session, the biggest one-day loss since March 7) was sparked by signals from minutes from the last RBA meeting, which markets understood as dovish.

The central bank said that June rate hike was balanced between hiking and pausing, warning that consumer spending slowed and increased risk about negative impact on economic growth from previous hikes, while weaker Chinese yuan also contributed to today’s fall.

Fresh weakness adds to initial signals of reversal pattern forming on daily chart, as bears took out initial Fibo support at 0.6795 (23.6% of 0.6458/0.6899) and 10DMA (0.6778), with extension below pivotal supports at 0.6731/21 (Fibo 38.2% / 100DMA) needed to confirm signal and risk deeper drop towards converging MA’s at (0.6690/68 zone (200/55/20DMA).

Weakening daily studies (19-d momentum and RSI in steep decline) support the action, although indicators still have a lot of space in the positive territory, warning that current pullback could be just a healthy correction (if dips find solid ground above 0.68 zone).

Res: 0.6795; 0.6831; 0.6855; 0.6899
Sup: 0.6731; 0.6690; 0.6668; 0.6626