AUD/USD has been under strong pressure ahead of the RBA monetary policy decision, with both domestic data and worse-than-expected Chinese PMI leasing to an early selling in Tokyo, which has taken the rate from 0.7150 session highs down to flirt with levels near 0.71, with the RBA outcome now to provide clues on the next direction. What to expect from the RBA meeting? - Nomura Andrew Ticehurst, Australia/New Zealand Rates Strategist at Nomura, notes: "We believe that developments over the past few months will have shifted a reluctant Reserve Bank of Australia (RBA) further towards easing. We expect its statement to read somewhat more dovishly on balance and we continue to look for a lower cash rate this year, forecasting a 25bp rate cut in May. We provide our take on recent developments and how they will likely impact the RBA’s thinking below." Andrew adds: "The RBA is also not a fan of super-low cash rates and, moreover, it believes that it is not the level of the cash rate that is holding the economy back; indeed, the RBA is uncertain that a rate cut could actually achieve a meaningful result and is not yet convinced that the economy requires more policy support. Yet as we assess the factors above, we believe the case for action has grown stronger." What to expect in AUD/USD? In the past 5/6 weeks, the COT report has shown a consistent commitment by leveraged accounts and asset managers alike to add longs in the Aussie, to the point that the 6A futures contract has seen market speculators turn net longs for the first time in over 18 months. The turn in views towards the Australian Dollar has also come backed up by asset managers now being net long as well, while dealers (net hedgers providing counterpart risk) have now seen a significant reduction in long contracts, suggesting that AUD demand is increasing, thus more long AUD products become available. On the flip side, commercials have remained strongly committed to sell as price approaches 7250. Given the more constructive AUD long background, it will probably take a significant dovish tun by the RBA to prolong the damage on AUD bulls. Last Friday's selling, according to the 6A contract, had more to do with a liquidation of longs rather than shorts adding into fresh positions, as per the -0.1k change in open interest. On the downside, should the RBA hint at lower rates in coming months, watch for 0.71 round number as key level (50 d-MA convergence) , followed by 0.7070 (liquidity below as per Feb 22nd low); a break and acceptance lower may trigger a resumption of the bear momentum towards 0.7050 ahead of 0.70. On the upside, if a more balanced approach is the outcome, with the market not finding enough evidence on the statement to discount further rate cuts in the foreseeable future, 0.7150 becomes immedite resistance, with acceptance above necessary to allow 0.7180 (50% retrac US GDP-led fall) ahead of 0.72 round number. For more information, read our latest forex news.