Australian Dollar: USD/AUD (AUD=X) RBA Keeps Cash Rate Unchanged
At its August 6 monetary policy meeting, the RBA kept the cash rate unchanged at an all-time low of 1.00%. The decision was in line with trader expectations, and followed two consecutive cuts in June and July. Nevertheless, the RBA’s dovish tone in its accompanying comments signaled that further monetary policy easing is likely in the coming months.
In its accompanying statement, the RBA noted that growth in the first half of the year has been lower than had been expected, amid slumping housing prices and muted disposable income growth, ensuring the central bank’s tone remained largely dovish.
The RBA also downgraded its inflation expectations against the backdrop of subdued price pressures and sluggish growth. The central bank now expects the headline rate to fall short of the target range in 2020 and will only reach above 2% in 2021.
The RBA also highlighted uncertain domestic consumption dynamics, the weak housing market and the ongoing trade dispute between the United States and China as the key risks to the outlook. Due to these major issues, the central bank noted that “an extended period of low interest rates will be required in Australia” in order to reduce unemployment and bring inflation to within target range.
RBA Governor Lowe: Sees ‘Gentle Turn’ in Economy
In a speech a couple of days after the RBA decision, Governor Lowe said he’s prepared to reduce Australia’s record low interest rates further if needed, though signaled the economy could be through the worst of its slowdown.
While the RBA was releasing forecasts calling for slower economic growth and inflation, and a lower unemployment rate, while hinting at the possibility of two more rate cuts that would bring the cash rate to 0.5%, Lowe was striking a note of quiet optimism.
“There are signs the economy may have reached a gentle turning point,” Lowe said in his opening statement to a parliamentary panel in Canberra Friday. “Consistent with this, we are expecting the quarterly GDP growth outcomes to strengthen gradually after a run of disappointing numbers.”
“While we might wish it were otherwise, it is difficult to escape the fact that if global interest rates are low, they are going to be low here in Australia too,” Lowe said in his semi-annual testimony. “Our floating exchange rate gives us the ability to set our own interest rates from a cyclical perspective, but it does not insulate us from long-lasting shifts in global interest rates driven by saving/investment decisions around the world.”
RBA Sees Further Economic Deterioration
In its monetary policy statement, the RBA revised down its forecast for 2019 from 2.75 percent to 2.50 percent. However, it retained its forecast for 2020 of 2.75 percent. For 2021, the RBA upgraded its growth forecast to 3.00 percent from 2.75 percent.
For underlying inflation, the RBA’s previous forecasts were 1.75 percent in 2019, 2.00 percent in 2020 and 2.00 percent for the year to June 2021. The RBA now expects inflation to be 1.50 percent in 2019, 1.75 percent in 2020 and then 2 percent in 2021.
In May, the unemployment rate was forecast to hold at 5.00 percent to December 2020 before falling to 4.75 percent by June 2021. The new forecasts have the unemployment rate at 5.25 percent in 2019 and again in 2020, then edging down to 5 percent in 2021.
Overall, the bias in prices is: Downwards.
By the way, prices are vulnerable to a correction towards 0.69.
The projected upper bound is: 0.68.
The projected lower bound is: 0.67.
The projected closing price is: 0.67.
A black body occurred (because prices closed lower than they opened).
During the past 10 bars, there have been 2 white candles and 8 black candles for a net of 6 black candles. During the past 50 bars, there have been 20 white candles and 30 black candles for a net of 10 black candles.
Momentum is a general term used to describe the speed at which prices move over a given time period. Generally, changes in momentum tend to lead to changes in prices. This expert shows the current values of four popular momentum indicators.
One method of interpreting the Stochastic Oscillator is looking for overbought areas (above 80) and oversold areas (below 20). The Stochastic Oscillator is 71.4284. This is not an overbought or oversold reading. The last signal was a buy 3 period(s) ago.
Relative Strength Index (RSI)
The RSI shows overbought (above 70) and oversold (below 30) areas. The current value of the RSI is 30.95. This is not a topping or bottoming area. A buy or sell signal is generated when the RSI moves out of an overbought/oversold area. The last signal was a buy 2 period(s) ago.
Commodity Channel Index (CCI)
The CCI shows overbought (above 100) and oversold (below -100) areas. The current value of the CCI is -74. This is not a topping or bottoming area. The last signal was a buy 2 period(s) ago.
The Moving Average Convergence/Divergence indicator (MACD) gives signals when it crosses its 9 period signal line. The last signal was a sell 13 period(s) ago.
Rex Takasugi – TD Profile
FOREX AUD= closed down -0.003 at 0.675. Volume was 8% below average (neutral) and Bollinger Bands were 118% wider than normal.
Open High Low Close Volume___
0.679 0.679 0.674 0.675 73,410
Short Term: Neutral
Intermediate Term: Bearish
Long Term: Bearish
Moving Averages: 10-period 50-period 200-period
Close: 0.68 0.69 0.71
Volatility: 7 8 9
Volume: 72,370 71,688 95,826
Short-term traders should pay closer attention to buy/sell arrows while intermediate/long-term traders should place greater emphasis on the Bullish or Bearish trend reflected in the lower ribbon.
FOREX AUD= is currently 4.5% below its 200-period moving average and is in an downward trend. Volatility is low as compared to the average volatility over the last 10 periods. Our volume indicators reflect moderate flows of volume out of AUD= (mildly bearish). Our trend forecasting oscillators are currently bearish on AUD= and have had this outlook for the last 11 periods. The security price has set a new 14-period low while our momentum oscillator has not. This is a bullish divergence.
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