AUD/USD ends 4-day rally on cautious RBA, attacks 0.7400

The AUD/USD pair faded a minor-spike seen in a knee-jerk reaction to the RBA minutes release, and now returns to the red zone for the first time in five days.

AUD/USD testing key support at 0.7400

The major fell sharply from daily highs of 0.7436, as the AUD was hit by a delayed reaction to the RBA minutes, which underscored persisting concerns over the housing markets. Meanwhile, markets shrugged off RBA comments on the inflation outlook, citing that the March quarter inflation increased the odds of the core inflation rising to 2% by early 2018. 

Adding to the weakness in the spot, a renewed bout of risk-aversion gripped the markets, diminishing the demand for risk assets such as equities, AUD etc. However, the Aussie fails to find support from broad based US dollar softness, as RBA minutes continue to weigh on investors’ minds.

All eyes now remain on the US dataflow due later on Tuesday ahead of the key Australian wage price index and employment report slated for release later this week.

AUD/USD Levels to watch   

At 0.7408, the pair finds the immediate support at 0.7399 (May 9 high) Selling pressure is likely to intensify below the last, dragging the Aussie to 0.7379/72 (classic S1/ Fib S2) and below that 0.7350 (psychological levels). On the flip side, the immediate resistance is aligned at 0.7442 (20-DMA), above which gains could be extended to the next hurdle located 0.7480 (classic R2/ Fib R3) and 0.7529 (50-DMA).