The 0.6850 level has provided some stiff resistance over the last two months so it is quite significant that it has now broken back through this level, as it is likely to play a role again. It wouldn’t have surprised many that it did fall back below 0.6850, nor that it received support from 0.6750.
Leading up to the three month high, the AUDUSD had been slowly moving higher achieving higher peaks and troughs to rally off its ten year low around 0.6670 reached in early October. Even though the AUDUSD has been well supported by 0.6750, it has fallen through this level on three occasions in the last few months. Towards the end of July, the AUDUSD suffered strong falls which sent it down to its trading range around 0.6750, which is generally where it has settled in the months since.
Just prior to this fall, the AUDUSD had surged strongly back up to the key level of 0.7050 as it then looked poised to threaten this level and possibly move higher, however these levels now seem some distance away. 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 has seemed content to trade within the range between 0.67 and 0.69, and is not showing any signs of breaking out of this range any time soon.
The Reserve Bank of Australia (RBA) will meet again today at its December policy meeting, after having cut rates three times since June to a historic low of 0.75%. The central bank is widely expected to hold rates steady as it assesses the full impact of its recent stimulus. One sector that is benefitting is housing having just posted its fifth consecutive month of gains, moving strongly in November. Yet again the RBA Governor Philip Lowe has been forced to rule out the possibility of Australia heading into negative rates territory, saying negative rates are “extraordinarily unlikely” to be used in Australia. Whilst negative rates have been used in other countries, they are a long way from being on the RBA’s agenda. “The Reserve Bank has long had flexible market operations that allow us to ensure adequate liquidity in Australian financial markets,” he said. “We have used this flexibility in the past, particularly during the global financial crisis, and we are prepared to use it again in periods of stress if necessary. At the moment, though, Australia’s financial markets are operating normally and our financial institutions are able to access funding on reasonable terms.”
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