The Aussie has been soft in the last 24 hours as the commentary around another rate is continuing to grow.

We keep hearing that the RBA will be cutting rates at the February meeting which would take the OCR down to 0.5%.

We could well have expected a 25 bp cut in January, but there is no meeting scheduled. That to me suggests the odds are really firming up.

There is also growing speculation that we could also see some sort of QE package.

The idea of QE in Australia seemed quite absurd not all that long ago, but while inflation remains soft, along with jobs the RBA are quickly running out of bullets.

Yesterday, Governor Lowe did state that he expects consumer spending to increase, but as yet we have seen no sign of that.

At the same time, we have to remember that there is a bit of a lag with monetary policy. The bulk of the cuts started around mid-year and many experts believe that there is around an 18 month lag period for those changes to filter through the economy.

So Lowe and co. would be well aware of that and pulling the trigger on a rate cut might be a little too soon. While QE might be overkill.

The AUD/USD had a soft session yesterday, finishing at the lows and trading all the way down to 0.6800.

This is exactly the price action we predicted, as there was the triangle formation that we expected would be the catalyst for a further breakdown in price.

So for now, we will likely tread water until after the FOMC meeting. Clearly the USD has plenty on the line, but I actually don’t expect much by way of big moves.

I’m still bearish on the Aussie and a break of that key level might be the next good opportunity to look for a short position.