09:09, 04 April

Enjoys Support from Key 0.7050 Level as RBA Keeps Rates on Hold

A few weeks ago the AUDUSD climbed slowly and steadily higher back above the current key level of 0.7050 and resumed its trading within its right range between 0.7050 and 0.7150. It has now remained tightly within this range for the last few weeks enjoying support from the current key level of 0.7050 whilst meeting similar selling resistance from the 0.7150 level. Just prior to this rally, the AUDUSD fell from near 0.72 down to its lowest levels in two months at 0.70 before the recent rally. 

For the most part in the last two months, the AUDUSD has traded within a range between 0.7050 and around 0.72, although this has now tightened a little with the resistance around 0.7150 in the last few weeks.

In early February the AUDUSD fell back down to support at 0.7050 after meeting stiff resistance at the key 0.73 level, and it is currently relying on support from 0.7050 which has supported the currency pair several times and very well since October 2018. In the lead up to hitting resistance at 0.73 the AUDUSD rallied well to move past the key 0.7150 level and reach a two month high around 0.73 before easing lower. Just prior to the decline, the AUDUSD had done very well to rally from its lowest level in many years below 0.67 back up to above 0.7150 and beyond.

Interestingly, the AUDUSD has remained within a relatively tight range between 0.7050 and 0.73 for the last six months and it will be interesting to see if it makes a clean break one way or the other. The AUDUSD didn’t finish 2018 very well falling strongly throughout December to hit a three year low just below 0.7050 before dropping sharply down to below 0.67 and regaining lost ground just as quickly as it fell.

For the 32nd month in a row, the Reserve Bank of Australia (RBA) left the official cash rate on hold this week, as widely expected. The RBA kept the official cash rate at a record low of 1.5% however a widely expected cut this year “looks inevitable”, many analysts say.  The consensus from financial markets remains that interest rates will be cut later this year.  RBA governor Philip Lowe said the soft GDP growth for the December quarter of just 0.2% paints a “softer picture of the economy” than the low unemployment figures.  “Growth in household consumption is being affected by the protracted period of weakness in real household disposable income and the adjustment in housing markets,” he said in his statement.  “The low level of interest rates is continuing to support the Australian economy,” Dr Lowe said.  “Further progress in reducing unemployment and having inflation return to target is expected, although this progress is likely to be gradual.”  The RBA is likely to keep some room available to move rates again should there be more disappointing GDP and jobs numbers, and property prices in coming quarterly results.