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AUDUSD - Settles Around Key 0.6850 Level as RBA Warns of 'Coronavirus Shadow'

   

 

AUDUSD - Settles Around Key 0.6850 Level as RBA Warns of Coronavirus Shadow
 
In the last two weeks or so the AUDUSD has consolidated right around the key level of 0.6850 after having eased from its highest level this year just above 0.7050. It had spent several weeks pushing higher to reach that level above 0.7050 however it ran into a wall of resistance at this key level which has previously offered stiff resistance to the AUDUSD last year. It has since eased from that resistance but enjoyed support from another key level in 0.6850 which has propped it up allowing it to rally again towards the key 0.7050 level, before the AUDUSD consolidated right around 0.6850. Should support at 0.6850 fail, then the 0.6750 level is also likely to step and offer some support having been a significant level earlier in the year.

For several weeks in May, the AUDUSD consolidated in a narrow range roughly between 0.64 and 0.65, meeting some resistance around 0.6550 during that time which kept a lid on prices and stopping any rallies from continuing higher to challenge the 0.6750 level. If the 0.6750 level fails to provide some support, the 0.6550 level may also step in and prop up prices.

Generally in the last two months, the AUDUSD has done very well to recover and move back above 0.60 after it dramatically dropped sharply from around 0.66 down to an 18 year low near 0.55 in the space of two weeks. As expected, the 0.60 level provided some much needed support allowing the AUDUSD to consolidate ad then return to higher prices. It had been applying pressure on the key 0.6750 level before the significant drop, so it is telling that it has returned to these levels, and then beyond.

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 is significant that it has been able to return there. 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.

Reserve Bank of Australia (RBA) Governor Philip Lowe has commented on how well the Australian dollar has recovered due to the nation’s handling of the coronavirus, however believes Australia needs major economic reform.  In fact, Dr Lowe believes Australia will "meander along with mediocre growth" unless it does so.  Commenting on the possibility of interest rate moves affecting the currency, Dr Lowe was quick to squash that opinion.  "I think it's likely we're going to see interest rates at their current level for years," he said.  "Once we build the bridge and we get to the other side and the recovery is taking place, I think we do face a world where there'll be a shadow from the virus for quite a few years, people will be risk-averse, they won't want to borrow, in Australia we're going to have lower population dynamics," he predicted.  "So, unless we change something, we're going to have a world of slower growth in Australia and, if that's the world we're in, we can't resolve that problem by just continuing to borrow,” he added.

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