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AUDUSD - Drops to Ten Year Low Below 0.67 after RBA Holds Rates

   

 

AUDUSD - Drops to Ten Year Low Below 0.67 after RBA Holds Rates
 
In the last few days the AUDUSD has met stiff resistance at the key 0.6750 level and has moved lower to its lowest levels for more than ten years below 0.67. After dropping sharply through any support at 0.6750, it was able to rally higher and attempt to move back above this level however it was met with strong selling.

In the last six weeks or so 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.

The 0.6750 level has supported the AUDUSD well in recent months so this level is likely to continue to offer some resistance to any rally higher. 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. 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 returned all of those gains in half the time and still remains within the range between 0.67 and 0.70, where it has spent the best part of the last nine months.

In no surprise to many, the Reserve Bank of Australia (RBA) left the official cash rate at the historic level of 0.75% in their first board meeting for the year last week.  This was despite some seeing a possibility of a further cut due to the economic impact of the ongoing bushfires and the more recent coronavirus and its potential impact.  Markets however are starting to assess the likelihood of a further rate cut at either the March or April meeting.  RBA Governor Philip Lowe indicated post meeting that the central bank was in little rush to cut rates further.  "Due to both global and domestic factors, it is reasonable to expect that an extended period of low interest rates will be required in Australia to reach full employment and achieve the inflation target," Mr Lowe said.  "The board will continue to monitor developments carefully, including in the labour market.  It remains prepared to ease monetary policy further if needed to support sustainable growth in the economy, full employment and the achievement of the inflation target over time," he added.  Commenting on the current coronavirus and its potential impact, Dr Lowe said, "Another source of uncertainty is the coronavirus, which is having a significant effect on the Chinese economy at present. It is too early to determine how long-lasting the impact will be."

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