AUDUSD drops after rate cut so is there more pain to come?

Chalk me up as one of those not surprised to see the RBA cut today. Stevens & Co can dress it up however they like, for me the kicker was last week's inflation data.

Here we are 150 odd pips south of the pre-announcement levels. This is the part of the show you don't want to get caught out on.

The Aussie has dived and just because it's not going down further right now doesn't mean it's not going to over the near term.

The market has gone from not expecting cuts to now guessing whether there's going to be more. That simple shift in thinking is often large enough to change the direction of a currency, or at the very least, put a temporary end to the current direction.

The trend this year has been one way only.

AUDUSD daily chart

Today's news may not end the trend entirely but it's likely to pause it for a while. While 0.7550 is holding support today, 0.7500 will be bigger, especially with the 55 dma sitting just above it

The rally sellers have already hit the bounce so that tells us what the emphasis is for now. I would think that looking at today's action we'll see 0.7600 putting up more of a fight and that we're likely to see 0.7550 tested again. Anything up towards 0.7700 is going to be gold for shorts to get back in.

The only saving grace from the RBA headlines is that they didn't come across as overly dovish. Maybe they still have a thought that the inflation numbers we're a one off but we'll have to see how things pan out down the road.