AUDUSD failed to overcome resistance level of 0.65 again

During yesterday’s trading session, the AUDUSD currency pair once again tried to break above the resistance level of 0.65. It was the fourth time over the past month that the level was tested, yet again the activity of buyers was not enough to overcome it. Today, one can see a pullback, which could extend down to 0.64 and the 50-day moving average line. AUDUSD is getting more consolidated within the range of 0.64–0.65. 

Weakening of the Australian dollar was fueled by the minutes of the central bank’s latest meeting. It turned out that officials of the Reserve Bank of Australia (RBA) discussed lowering the key rate by 0.5% on May 20. Although eventually they decided to stick to a standard 0.25% cut, the very fact of such a discussion weighs on the national currency. If the RBA cuts rates at a faster pace, the Aussie will fall under serious pressure. 

Following the release of the RBA’s minutes, market participants raised bets on a reduction in borrowing costs in July, estimating its probability at 70%. Bloomberg analysts believe expectations could rise further tomorrow after data on Australia’s GDP in the first quarter is released. The current consensus forecast suggests a slowdown in quarterly economic growth to 0.4% from 0.6%.

The RBA’s Sarah Hunter reiterated concerns about the Australian economy during her speech today. She said the direct impact from US import duties is unlikely to be significant, as only 1.5% of Australia's GDP depends on trade with the country. However, Australian companies have close ties with China, which is the main target of US tariffs. From this point of view, the negative effect on the Australian economy could be much greater, making more monetary easing by the RBA necessary. 

The most likely short-term scenario for AUDUSD is a correction to 0.64. At this level, it is worth taking at least part of the profit on short positions, as the bulls can drive the currency pair higher. 

Consider the following trading strategy:

Sell AUDUSD at the current price. Take profit – 0.64. Stop loss – 0.65.