The AUD/USD drop below 0.6880 from around 0.6900 on the RBA's Q3 Statement on Monetary Policy is somewhat surprising as one of the central bank's comments could be interpreted as suggesting they will hold off from cutting rates again until well into 2020.
This is due to the already low settings and that further easing could convey an "overly negative" view of the Australian economy nRUA7MEF75. Besides warning they are running out of room to cut rates further, the RBA also said the Australian economy was "gradually coming out of a soft patch" and sounded a bit more upbeat on the global economy. The FX market appears to have focussed on the one negative change to their outlook, which was giving up on predicting any meaningful wage growth for the foreseeable future. Yet this is consistent with recent comments from RBA Governor Lowe and other board members, who have indicated that unemployment would have to significantly fall form current levels for a wage boost to emerge.
The negative view on wage growth will likely ensure the cash rate stays lower for much longer, but is unlikely to mean more aggressive easing from current levels.
The impact on the AUD/USD from today's SOMP will likely fade, as the market shifts focus back to the progress of U.S.-China trade talks.
AUD/USD support lies at the 21-day MA at 0.6850, while key resistance comes in at the 200-day MA around 0.6950.
That range should hold until there is more clarity on the U.S.-China trade deal nL3N27N228.
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