RBA Catches Traders Offside With Rate Pause

AUD Under PressureThe Aussie Dollar has been under heavy selling pressure across the European morning on Tuesday, following the August RBA meeting overnight. The bank caught markets a little offside by keeping rates steady at 4.10%. While expectations were split, consensus favoured a further .25% hike yesterday, as reflected in the Bloomberg economists survey where 15 out of 25 respondents forecast a further hike. This was similar to the Reuters survey which showed 20 out of 36 in favour of a hike.Tightening Might be FinishedExplaining the decision to hold rates steady, the RBA noted that past tightening was helping cool demand, evidenced by falling inflation. However, the bank did reaffirm its prior message that it stands willing to tighten further if necessary. Lowe noted that recent data was consistent with inflation returning to the bank’s 2% – 3% target band over the measured horizon, allowing for a pause here. In light of these comments, the market view has now shifted with traders sensing that the bank will be done with tightening unless we see any upside inflationary surprise in coming months. As such, AUD looks likely to remain pressured near-term.Technical ViewsAUDUSDThe sell off in the Aussie has seen the pair testing back below the .6681 level today. While below here, and with momentum studies falling, the pair is vulnerable to a drop down to deeper support at the .6520 level. To the topside, .6857 and the bearish trend line remain the key resistance areas to watch.