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AUD/USD Could Break Below 0.6250 If RBA Enacts Aggressive Rate Cut Overnight
Monday, 02 February 2009 18:58:00 GMT  |  Terri Belkas, Currency Strategist
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Despite a rally during the first half of the US trading session, the Australian dollar remains under pressure and could see further declines toward 0.6075 overnight.

Indeed, the Reserve Bank of Australia is anticipated to cut rates in their fifth consecutive meeting at 22:30 ET, with a Bloomberg News poll of economists calling for a 100 basis point cash rate target reduction to a record low of 3.50 percent. This would be similar to what the New Zealand dollar experienced on January 28, but only a larger-than-expected rate cut or comments suggesting they will continue to reduce rates aggressively may weigh on the Australian dollar. Overall, Australia is facing major headwinds from financial market instability, which has led to tighter credit conditions, as well as from both domestic and foreign demand. Indeed, global slowdown is hurting exports, something the Australian economy depends on for employment and broad growth. The situation has not been helped by significantly lower commodity prices, though it has served to cool inflation pressures, which leaves the RBA additional leeway to make monetary policy more accommodative in coming months.

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Source: FXTrek Intellicharts

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