Last weekend was quite a disappointing one for many Asian ministers as the APEC meeting could not come to a joint agreement at the end of the summit, due to a head-to-head collision between the US and China on the terms of global trade. Interestingly enough, this failure in resolution was the first in over 20 years since the cooperation was established in 1989. Impact? AUD/USD gapped down about 20 pips and had slid almost 100 pips since then.
Tuesday Asia morning, RBA released rather an upbeat outlook on the economy, reporting stronger-than-expected employment and there is no need for a policy adjustment in the near term and repeated the same previous line “the next move in the cash rate was more likely to be an increase than a decrease.” As of this writing, AUD/USD is trading circa 0.7240 and it would be interesting to see if the 45 degree uptrend line is going to hold. Quite likely, the rate is going to test last month's pivot, circa 0.7205, which is also about 38.2% of last month's low and this month's high. A break of the 45-degree uptrend line could see the pair slide to 50% retracement, circa 0.7170, which I see as a good point to initiate a long.
As speculative positioning is currently oversold, I expect limited downside and do not see the prospect of a monthly pivot test. However, as Aussie lacks high-impact economic releases this week and next, that move would attract bargain hunters who want to cover their shorts.