As consensus slightly tilted toward another 25bps hike from the Reserve Bank of Australia (RBA) on Wednesday, the Australian market underwent another surprise decision as the RBA kept rates unchanged at 4.1%. Due to the uncertainty leading up to the decision, there was a significant move in the AUDUSD currency pair, sinking on its way to its most significant daily decline in over a month.  

The RBA’s decision saw their cash rates remaining unchanged at 4.1%, as previous rate hikes are working well toward cooling domestic inflation. However, the door remains open for another rate hike in upcoming meetings, putting a floor on the downside. The Caixin Manufacturing PMI from China further weighed on the currency pair, though, as the figure slumped from 50.5 into contractionary territory at 49.2, putting further doubt on the pace of the recovery. 

Technical 

On the 1D chart, an ascending triangle has formed as the price action met resistance at the 50-day moving average of $0.6698. The interest rate decision triggered a dynamic support breakdown, exposing the currency pair to further downside. 

However, support at $0.6624 (S2) is holding in the Tuesday session, which leaves the possibility for a retest at the breakdown point close to the pivot point at $0.6689. If the currency pair can break through this pivot, a move back into the triangle is possible toward $0.6750 and $0.6806.  

However, a breakdown at S2 could confirm the downside break toward $0.6575. From there, lower support exists at $0.6485 for the formation of a new downtrend.  

Summary 

The surprise pause from the RBA and weaker-than-expected data from China has triggered a selloff in the AUDUSD currency pair, well on its way to its biggest daily decline in a month. If a breakdown at $0.6624 occurs, the downside could continue toward $0.6575. However, if the market finds buyers at S2, there could be a retest at the breakdown point.  

Sources: Koyfin, Tradingview