Currency Analyst since 2010

AUD/USD: waiting for the RBA

Australian dollar fails to make a significant correction, and the downtrend for AUD/USD persists.

At the past week we’ve seen a sharp reversal in the market’s expectations about the policy of the Reserve Bank of Australia, According to Reuters, debt futures now imply a near 70% chance the RBS will cut rate at its policy meeting on Tuesday, Feb. 3, up from less than 10% earlier this week.

Such sharp change in investors’ mood was caused by the fact that the central bank of Australia’s neighbor, New Zealand, has hinted on a rate cut. In addition, the regulators of the many advanced economies are planning to ease policy or are already doing it. Despite higher than expected inflation data many expect the RBA to join the global currency war if not at the February meeting, then at the March one. Although not everyone shares this point of view and the consensus forecast is that the central bank will keep rates unchanged, the expectations of lower rates will keep AUD under pressure.

From the technical point of view, AUD/USD has reached 200-month MA on the downside (0.7780), and the close below this level in January will be a strong bearish signal. In December the RBA’s Governor Stevens said that Aussie should trade closer to 0.7500. In case of corrections up Aussie will meet resistance at 0.7950 and 0.8100.

We also recommend investors to follow the rest of the data releases in Australia as well as the important figures from China which will be released during the weekend.


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