Australian Dollar: USD/AUD (AUD=X) Tumbles as Westpac Calls for Two Rate Cuts
The week started with the minutes of the Reserve Bank of Australia Monetary Policy meeting showing that the central bank saw “significant uncertainties” in the economy as property values took a nosedive. This opened the door to future rate cuts.
Earlier in the month on February 6, RBA Governor Philip Lowe opened the door to a possible rate cut by acknowledging growing economic risks, in a surprise shift from its long-standing tightening bias.
Australian economic data was mixed last week with the Wage Price Index coming in at 0.5%, lower than the 0.6% forecast. The Employment Change showed the economy added 39.1K jobs in January. This was above the estimate. However, the previous month was revised lower to 16.9K. The Unemployment Rate came in unchanged at 5.0%.
The labor market data was actually supportive for the Aussie, but the currency plunged mid-week following reports that China banned coal imports from the country at a major port.
According to Reuters, customs at the Chinese port of Dalian has banned imported Australian coal since February, and will “cap overall coal imports from all sources to the end of 2019 at 12 million tonnes.” It also said that major posts elsewhere in China prolonged clearing times for Australian coal to at least 40 days. On Friday, the Aussie rebounded after Australian officials downplayed the impact of the ban.
In other bearish news, Westpac changed its interest rate forecast and now expects the Reserve Bank to deliver a 0.25 percentage point reduction to official interest rates in both August and November. That would trim the RBA’s official cash rate to just 1 percent.
Last week, the AUD/USD settled at .7128, down 0.0011 or -0.15%.
Overall, the bias in prices is: Sideways.
The projected upper bound is: 0.73.
The projected lower bound is: 0.70.
The projected closing price is: 0.71.
A white body occurred (because prices closed higher than they opened).
During the past 10 bars, there have been 6 white candles and 3 black candles for a net of 3 white candles. During the past 50 bars, there have been 25 white candles and 23 black candles for a net of 2 white candles.
A spinning top occurred (a spinning top is a candle with a small real body). Spinning tops identify a session in which there is little price action (as defined by the difference between the open and the close). During a rally or near new highs, a spinning top can be a sign that prices are losing momentum and the bulls may be in trouble.
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 35.0121. This is not an overbought or oversold reading. The last signal was a sell 2 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 48.93. 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 45 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 34. This is not a topping or bottoming area. The last signal was a buy 9 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 buy 4 period(s) ago.
Rex Takasugi – TD Profile
FOREX AUD= closed up 0.000 at 0.713. Volume was 96% below average (consolidating) and Bollinger Bands were 1% wider than normal.
Open High Low Close Volume___
0.712 0.714 0.712 0.713 3,930
Short Term: Neutral
Intermediate Term: Bearish
Long Term: Bearish
Moving Averages: 10-period 50-period 200-period
Close: 0.71 0.71 0.73
Volatility: 8 11 11
Volume: 98,209 103,433 108,177
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 1.8% below its 200-period moving average and is in an downward trend. Volatility is high 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 bearish on AUD= and have had this outlook for the last 8 periods.
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