The Aussie suffered big losses this week amid enduring US economic data, that may see the FED patient in cutting interest rates. If the FED delays rate cuts till later this year, then the Aussie is likely to remain under pressure as the RBA may continue its cycle of rate cuts. The RBA cut interest rates last week from 1.5% to 1.25% in an effort to bring the unemployment rate to a level (below 4.5% according to the RBA communique) it believes warrants a pause. Interest rates differentials are the main driver for the Aussie right now despite record high iron ore prices. From a technical perspective, the Aussie ended the week at the lower end of its range. The release of the RBA minutes on Tuesday and the FED rate decision on Wednesday ensures that the pair will experience above-average volatility.
1. Interest rate differentials likely to widen if the FED stays patient as the RBA continues to cut, keeping the Aussie under pressure despite record Iron Ore prices
2. Aussie has de-coupled from Iron Ore prices
3. AUDUSD 4hr Chart – At an important inflection point, watch closely this week as volatility set to rise
