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Investors shrug off dovish RBA minutes as AUD edges higher

AUD - Australian Dollar

The Australian dollar enjoyed mixed fortunes through trade on Tuesday bouncing between intraday lows at 0.6785 and session highs at 0.6835. The AUD fell throughout the domestic session as investors reacted to the RBA’s November policy meeting minutes, wherein board members seemingly considered cutting interest rates to 0.5%. Many analysts had priced in monetary policy stability and the revelation the RBA considered reducing interest rates further prompted a dovish response and forced the AUD toward supports at 0.6780/0.6770. The sell off however was short lived as the minutes failed to foster any meaningful change in expectations moving into December with 75% of market commentators expecting the board will again opt to maintain the current cash rate, allowing the economy to absorb the recent cuts before acting again in February. The Aussie dollar then began unwinding the knee jerk sell off, climbing higher throughout the rest of the trading day before meeting resistance on moves approaching 0.6830/35.

With little of note on today’s domestic economic docket we expect the AUD will remain largely range bound, bouncing between the aforementioned support and resistance handles as markets turn their attentions to tonight’s US Federal Reserve and FOMC meeting minutes for direction, while US/China trade talk and ongoing UK election headlines drive broader risk flows.

Key Movers

Moves among major currencies were largely muted throughout Tuesday with both the USD and Euro trading flat on the day. Sterling edged lower through trade on Tuesday as investors checked expectations as the December 12 election looms ever nearer. Recent polls show the incumbent Conservatives hold a relatively comfortable lead over its primary opposition rivals bolstering expectations Johnson will be able to win a majority and force his withdrawal agreement through the House of Commons allowing the UK to exit the EU on January 31. While sterling still looks cheap much of the upside that would come from a Johnson victory has already been priced in with investors wary of extending gains significantly beyond 1.30 in the short term.

Attentions now turn to the FOMC’s meeting minutes as a key marker guiding direction on today’s docket.

Expected Ranges

AUD/USD: 0.6770 - 0.6880 ▲

AUD/EUR: 0.6120 - 0.6190 ▲

GBP/AUD: 1.8810 - 1.9110 ▼

AUD/NZD: 1.0600 - 1.0700 ▼

AUD/CAD: 0.8950 - 0.9090 ▲