The Reserve Bank of Australia's quarterly Statement on Monetary Policy today has fuelled rate cut expectations and encouraged a bearish market to add to AUD/USD shorts, threatening key technical support.
Australian government bond yields tumbled, with 2-year yields down more than 7 basis points on the day, adding to downward pressure on the currency.
The SOMP lowered the path for GDP growth, suggesting a growth rate of 2.7 percent in 2020 and 2021.
It also described the housing slowdown as a "significant" uncertainty and noted that Chinese data suggests a more pronounced slowing in momentum there nRUA7DEF4K.
With news overnight that Presidents Trump and Xi will not be meeting before the March 1 tariff deadline nL1N2020Z6, the dominoes have all lined up for a weaker AUD/USD.
While the market reaction to an essentially more balanced RBA outlook may be a little overdone, there is certainly nothing in the SOMP to encourage AUD/USD bulls.
A close below the Jan 21 low and 38.2 Fibo at 0.7074/76 will open up a move to test the 50 percent retracement of the post 'flash crash' rally at 0.7005 and the psychological 70-cent level.