Only a week before the strong fall, the AUDUSD surged strongly back up to the current key level of 0.7050 as it then looked poised to threaten this level and possibly move higher. Two weeks earlier it tested the level as it reached a seven week high on the back of a steady climb higher over three weeks as it moved from support at 0.6850.
In the middle of June it did drop sharply to its then lowest levels for 2019 pushing through any support around 0.6850 for a short period of time before being bought up again. For the last three months, the AUDUSD seemed content to trade within the range between 0.6850 and 0.7050, before the recent drop lower. Despite several attempts, the AUDUSD has been unable to move back above the 0.7050 level as it is now offering resistance and preventing it from returning to its range above 0.7050.
In mid-April, the AUDUSD crept higher and pushed through the resistance at 0.7150 to reach a six week high near 0.72, however it then fell sharply over the next four weeks down to the four month low. Back at the end of February, the AUDUSD fell from near 0.72 down to its lowest levels in two months at 0.70 before a healthy rally. The 0.7050 level remains key as it supported the currency pair several times and very well since October 2018.
After delivering its first back-to-back interest rate cut since 2012, and setting a record low cash rate of 1% last month, the Reserve Bank of Australia (RBA) decided to sit last week as the market had generally anticipated the move. RBA Governor Lowe said the unemployment rate is expected to decline over the next two years to around 5%, slightly down from its current 5.2%. "Wages growth remains subdued and there is little upward pressure at present, with strong labour demand being met by more supply," Dr Lowe said. "Caps on wages growth are also affecting public-sector pay outcomes across the country. It is reasonable to expect that an extended period of low interest rates will be required in Australia to make progress in reducing unemployment and achieve more assured progress towards the inflation target." There was no direct reference to the recent deterioration of relations between the US and China, apart from repeating the previous observation that the increased uncertainty generated by the trade and technology disputes is affecting investment. "The risks to the global economy remain tilted to the downside," Dr Lowe noted.
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