The Australian Dollar has softened today on the back of the release of the latest RBA meeting minutes overnight. Following a second, unexpected rate-hike at the last meeting, expectations ahead of the minutes were mostly hawkish. Given the recent increases, traders were looking for clear signs that the bank intends to press ahead with further rate hikes, in line with warnings issued by governor Lowe.

Inflation Still a Concern – But No Clear Rates Signal

However, the minutes struck a slightly different tone, revealing that the decision to hike rates last time was finely balanced. This was less hawkish than traders were expecting and saw AUD well-sold in reaction. However, the minutes noted that the bank remains concerned over persistent strength in inflation and the prospect of wage increase becoming entrenched, which would make it difficult to bring inflation down. As with previous meetings, the bank also discusses the lag in policy impact as well as the difficulty facing the RBA in bringing inflation down while avoiding a recession. In all, the minutes certainly leave the door open to further hikes but with no direct confirmation, AUD looks vulnerable to further correction near-term.

Technical Views

AUDUSD

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The rally in the Aussie has stalled for now into a test of the .6857 level. Price has now dropped back below the level and with momentum studies pulling back from highs, the focus is on a further correction lower towards the .6681 level next. To the topside, should bulls get back above .6857, the focus will be on a move up to .7103 next. 

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