The pair is down 0.6% on the day to 0.6582 currently with the aussie lagging against the rest of the major currencies bloc, after the RBA kept the cash rate unchanged in its final policy decision for the year. This key passage from November (after they raised the cash rate) was maintained:
"Whether further tightening of monetary policy is required to ensure that inflation returns to target in a reasonable timeframe will depend upon the data and the evolving assessment of risks."
And that continues to cast some doubts over whether or not there will be any more rate hikes in the months ahead. As things stand, traders have no longer priced in any further increases to the cash rate. But at the same time, there are no rate cuts yet priced in for the RBA for next year itself.
Going back to AUD/USD, the pair is now falling to a test of its 200-day moving average (blue line) at 0.6578 and that is the key level to watch right now. Keep above that and buyers will retain a more bullish bias in the bigger picture but fall below, then we might be staring at a further retreat towards 0.6500 next.
With the aussie side of the equation now settled, it will come down to dollar sentiment and that relies more on developments in the bond market and risk mood for the time being. All that before the main focus shifts towards the US non-farm payrolls release later in the week.
