The Monetary Policy Committee (MPC) of the Reserve Bank of Australia expectedly decided to reduce the Cash Rate in the country from 0.25 per cent to 0.10 per cent. The RBA became the first major central bank to adopt a more accommodative monetary policy stance in this action-packed week.
In addition to cutting the main interest rate, the Board also decided to broaden its underlying quantitative easing programme by purchasing an additional $100 billion worth of government bonds of maturities of around 5-10 years over the next six months.
In a departure from the main focus of other central banks, that has been inflation, since the beginning of the coronavirus crisis, the MPC decided to underscore the importance of jobs creation as opposed to the need for spurring higher inflation.
"At its meeting today, the Board decided on a package of further measures to support job creation and the recovery of the Australian economy from the pandemic. With Australia facing a period of high unemployment, the Reserve Bank is committed to doing what it can to support the creation of jobs."
Headline inflation seesawed in the third quarter, which represents a strong sign of recovery. Meanwhile, the unemployment rate seems to be stabilising well above its pre-crisis levels.
The Australian dollar reacted positively to RBA's decision by strengthening against the greenback. As can be seen on the 4H chart below, the Aussie consolidated above the 20-day MA (in red) following the recent rebound from the major support level at 0.70000.
The latter bears considerable psychological significance, which makes it a very likely turning point for the underlying direction of the price action. Hence, the AUDUSD could test breaking higher, despite the recent rally of the greenback, before a new dropdown is possible.
One such bullish correction could extend towards the minor support level (currently resistance) at 0.71000, which is converging with the 50-day MA (in green) and the 100-day MA (in blue) at present, before the underlying bullish commitment is checked.