AUDUSD

09:23, 02 July

Drops Back Below 0.70 as RBA Expected to Cut Rates Again Today

In the last two days the AUDUSD has dropped sharply back below 0.70 after reaching a seven week high near the key 0.7050 level. It did however enjoy a solid surge higher in the last couple of weeks when it bounced strongly off support at 0.6850 which has helped prop up the currency pair twice in the last two months. This was a solid reversal from the week prior which saw it drop sharply to its lowest levels for 2019 pushing through any support around 0.6850 for a short period of time.
It had enjoyed a solid few weeks rallying higher to a three week high poking its head just above 0.70, which it surpassed in the last 48 hours. Currently it looks content to trade within the range between 0.6850 and 0.7050.

The key 0.7050 level which ably supported the currency pair and more recently has provided resistance is likely to play a role again should prices rally a little more. Despite several attempts, the AUDUSD has been unable to move back above this 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. Throughout most of March and April the AUDUSD traded within a range between 0.7050 and around 0.72, although this tightened a little with the resistance around 0.7150. The 0.7050 level remains key as it supported the currency pair several times and very well since October 2018.

The Reserve Bank of Australia (RBA) is widely expected to deliver the first back-to-back interest rate cut since 2012 today and set a new record low cash rate of 1% as it continues to try and ignite economic growth.  On Monday, there was a 23% chance of no change and a 77% chance that the official cash rate would decrease to 1%.  RBA Governor Philip Lowe has been hinting about the need for further cuts, given April's increase in the unemployment rate to 5.2%.  For those who don’t believe they will cut today, there is a strong feeling it will happen in August anyway.  Others have suggested that another cut would help Australia’s housing market, as house prices, particularly Melbourne and Sydney, appear to have stabilised.  NAB economists said they did not see a need for the RBA board to wait any longer with delivering further stimulus to a stagnating economy.  “There is not much separating July from August given the time it takes for policy to have an effect on the economy, but we do not see a need for the board to wait,” NAB said in a release last week. “In brief, the RBA is behind the curve and needs to catch up quickly.”