Australian Dollar: USD/AUD (AUD=X) traders focus on RBA interest rate cut
On the back of the recent RBA interest rate cut, there are mounting calls in Australia, to continue to cut with some expecting the cash rate to drop to 0.5%.
At least that is the expectation of a few of the major banks both locally and around the world. The calls come as the AUD/USD declined sharply in New York on Friday, taking it below the key 0.6900 level. While the yield on the Aussie 10-year bond is now down to 1.382%.
Markets are currently pricing in two 25 basis point cuts by years end, while a number of economists now expect the cash rate, to hit 0.5 per cent by next June. Down from the current rate of 1.25%.
The Royal Bank of Canada’s Australian office cut their forecast to 0.5% while suggesting they would need rates at that level to spur employment growth to below the 4.5% (unemployment rate) level. At the same time, National Australia Bank stated that it expects a 0.75 per cent rate by the end of 2019.
The target for the RBA for many years has been to lift inflation back to the 2-3% target band. It is currently sitting at or below the lower end of that range and their plan is to target employment in the hopes of stimulating the economy and therefore inflation.
This past Thursday, the ABS released the latest jobs report out of Australia, indicating that there were 40K new jobs created last month. However, the big worry for the RBA was the unemployment rate remained steady, while the expectation was for a fall to 5.1%.
Clearly, these recent figures are not including any impact from the most recent rate cut, but there are still many that are sceptical as to how effective these cuts will be in stimulating the economy. While at the same time, lower rates really hurt different segments of the economy, particularly retirees and those on fixed incomes.
As mentioned, the Aussie has finally started to respond to the negative fundamentals and faded during Friday’s US session. Price ticked below 0.6900 and is now pressing the most recent lows. While there is already a strong short base, the reality is that the Aussie will have a hard time bouncing from here.
Overall, the bias in prices is: Downwards.
The projected upper bound is: 0.69.
The projected lower bound is: 0.68.
The projected closing price is: 0.69.
A white body occurred (because prices closed higher than they opened).
During the past 10 bars, there have been 4 white candles and 6 black candles for a net of 2 black candles. During the past 50 bars, there have been 21 white candles and 28 black candles for a net of 7 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 10.8584. This is an oversold reading. However, a signal is not generated until the Oscillator crosses above 20 The last signal was a sell 7 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 35.15. 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 20 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 -145.This is an oversold reading. However, a signal isn’t generated until the indicator crosses above -100. The last signal was a sell 5 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 1 period(s) ago.
Rex Takasugi – TD Profile
FOREX AUD= closed unchanged at 0.687. Volume was 98% below average (consolidating) and Bollinger Bands were 16% narrower than normal.
Open High Low Close Volume___
0.686 0.688 0.686 0.687 1,934
Short Term: Oversold
Intermediate Term: Bullish
Long Term: Bearish
Moving Averages: 10-period 50-period 200-period
Close: 0.69 0.70 0.71
Volatility: 6 7 9
Volume: 80,823 88,709 104,256
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 3.4% below its 200-period moving average and is in an upward trend. Volatility is low as compared to the average volatility over the last 10 periods. Our volume indicators reflect volume flowing into and out of AUD= at a relatively equal pace (neutral). Our trend forecasting oscillators are currently bullish on AUD= and have had this outlook for the last 7 periods.