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AUDUSD - Consolidates Around 0.58 after Emergency RBA Rate Cut



AUDUSD - Consolidates Around 0.58 after Emergency RBA Rate Cut
In the face of steep falls, the AUDUSD has been able to stop the bleeding for the time being and consolidate in the last few days spending several days trading around 0.57 and 0.58. Given how fast it had been moving, the fact that it has slowed right down recently is a positive for its short term outlook. In less than two weeks, the AUDUSD dramatically dropped sharply from around 0.66 down to an 18 year low near 0.55. It had only recently been applying pressure on the key 0.6750 level before the drop.

Due to its current multi-year low, there are no obvious support levels available, although the AUDUSD may very well be propped up at different levels. The AUDUSD has now spent almost the last two months below the key 0.6750 level and is likely to meet resistance at this level if it is able to miraculously regain the lost ground in the near future.

In the last three months the AUDUSD has generally fallen sharply from a six month high above 0.70 down to the current lows although it did enjoy some solid support from another key level of 0.6850 before dropping down to 0.6750. Likewise the 0.6850 also looms likely to offer resistance should the AUDUSD be able to get back above the 0.6750 level any time soon. In the last two weeks of last year, it surged higher off support at 0.6850 to the six month high after having moved through previous resistance at 0.6850, which had put selling pressure on prices.

The trading range between 0.6750 and 0.6850 has been quite popular in the last six months, so it wouldn’t surprise many if it was to return there again, however again this is now a long way away. In the last three months of 2019, the AUDUSD steadily and slowly moved higher achieving higher peaks and troughs to rally off its ten year low around 0.6670 reached in early October. It has now however returned all those gains in half the time and has moved lower to below 0.60.

In an emergency move, the Reserve Bank of Australia (RBA) has cut interest rates to a record low of 0.25% and announced never seen before measures to help protect the Australian economy from the coronavirus.  As part of its first ever quantitative easing program, the central bank will buy Australian government part of its first-ever, and provide a three-year funding facility to provide cheap loans for Australian banks.  In a country wide shutdown of non-essential services, countless Australians have suddenly lost their jobs and the stock market has lost billions of dollars in value in a short period of time.  The RBA Governor Philip Lowe said the bank would hold the cash rate at 0.25% "until progress is being made towards full employment and it is confident that inflation will be sustainably within the 2-3 per cent target band".  "Before the coronavirus hit, we were expecting to make progress towards full employment and the inflation target, although that progress was expected to be only very gradual," he said.  "Recent events have obviously changed the situation.  We are likely to be at this level of interest rates for an extended period."  Dr Lowe added that he was not able to provide an updated set of economic forecasts because "the situation is just too fluid".

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The information provided herein is for general informational and educational purposes only. It is not intended and should not be construed to constitute advice. If such information is acted upon by you then this should be solely at your discretion and Valutrades will not be held accountable in any way.

This post was written by Graeme Watkins

CEO Valutrades Limited, Graeme Watkins is an FX and CFD market veteran with more than 10 years experience. Key roles include management, senior systems and controls, sales, project management and operations. Graeme has help significant roles for both brokerages and technology platforms.