AUD/USD mildly bid after RBA, nears 200-day MA

• RBA keeps interest rates unchanged as expected, avoids being overly cautious.
• AUD mildly bid after the rate decision.
• Yield differential largely unchanged.

AUD/USD turned positive and neared the 200-day MA level of 0.7697 after the Reserve Bank of Australia kept the cash rate unchanged at 1.5 percent as expected and refrained from sounding overly cautious despite the recent string of weak economic data.

A significant minority in the markets were expecting the RBA to express concerns regarding the recent slowdown in consumption (as highlighted by the retail sales) and weak inflation. However, the RBA retained the October language - "forecast remains for inflation to pick up gradually". Thus, the Aussie turned positive.

Still, the gains are hard to come as the central bank sees higher AUD weighing over price pressures. The central bank also sees deterioration in the terms of trade over the period ahead.

It remains to be seen if the Aussie keeps gains as the AU-US 10-year yield spread remains largely unchanged at 27 basis points.

AUD/USD Technical Outlook

Jim Langlands from FX Charts writes, "while we are below the neckline of the head/shoulder formation and the 200 DMA, we could be in for further downside pressure where support will once again arrive at 0.7640/50 and again at 0.7625. A break of this would bring fresh selling which could then see a run towards 0.7600 and eventually to 0.7570."

"On the topside, resistance will be seen at 0.7700 ahead of 0.7720 and then 0.7740. Given the generally heavy look of the charts I still prefer to sell into strength."