News & Analysis at your fingertips.

We use a range of cookies to give you the best possible browsing experience. By continuing to use this website, you agree to our use of cookies.
You can learn more about our cookie policy here, or by following the link at the bottom of any page on our site.

0

Notifications

Notifications below are based on filters which can be adjusted via Economic and Webinar Calendar pages.

Live Webinar

Live Webinar Events

0

Economic Calendar

Economic Calendar Events

0
Free Trading Guides
Subscribe
Please try again
EUR/USD
Bullish
Oil - US Crude
Bearish
Wall Street
Bullish
Low
High
of clients are net long.
of clients are net short.
Long Short

Note: Low and High figures are for the trading day.

Data provided by
Gold
Mixed
GBP/USD
Bullish
USD/JPY
Mixed
More View more
Real Time News
  • US 10yr yields have notably tightened, falling from 1.10% yesterday to trade around 1.04% today. Yields still remain elevated in 2021 compared to earlier in the pandemic. $GOVT $IEF $USD https://t.co/uT27KDUkhM
  • Hey traders! Get your Tuesday market update from @DailyFX Chief Strategist @JohnKicklighter 👇 https://t.co/WPk9aapKhs
  • $EURGBP is currently trading around 0.8855, nearing the lows set around 0.8840 last week. A break below this level would mark the pair's lowest level since May. $EUR $GBP https://t.co/QinuctvrVK
  • IG Client Sentiment Update: Our data shows the vast majority of traders in Ripple are long at 100.00%, while traders in Germany 30 are at opposite extremes with 70.50%. See the summary chart below and full details and charts on DailyFX: https://www.dailyfx.com/sentiment https://t.co/B4i5VeBnUE
  • Commodities Update: As of 17:00, these are your best and worst performers based on the London trading schedule: Silver: 0.50% Gold: -0.17% Oil - US Crude: -0.27% View the performance of all markets via https://www.dailyfx.com/forex-rates#commodities https://t.co/1n9eel9mPM
  • Forex Update: As of 17:00, these are your best and worst performers based on the London trading schedule: 🇳🇿NZD: 0.49% 🇬🇧GBP: 0.40% 🇦🇺AUD: 0.35% 🇪🇺EUR: 0.10% 🇯🇵JPY: 0.07% 🇨🇭CHF: 0.06% View the performance of all markets via https://www.dailyfx.com/forex-rates#currencies https://t.co/or5TUZZUWN
  • The DAX is breaking lower out of a short-term topping sequence, the pattern discussed on Thursday as having the potential to at least induce a pullback within the context of a larger uptrend. Get your #DAX market update from @PaulRobinsonFX here:https://t.co/nFPT9a7KGi https://t.co/AJFUWoj2uQ
  • Yellen officially sworn in as Treasury Secretary by VP Harris. $USD
  • Gold Price Forecast: XAU/USD Resistance Bound Ahead of the Fed https://www.dailyfx.com/forex/fundamental/daily_briefing/session_briefing/daily_fundamentals/2021/01/26/Gold-Price-Forecast-XAU-USD-XAUUSD-GLD-Resistance-Bound-Ahead-of-the-FED-FOMC.html $Gold https://t.co/P7vDZ3wYgD
  • Indices Update: As of 17:00, these are your best and worst performers based on the London trading schedule: France 40: -0.08% Wall Street: -0.09% US 500: -0.20% Germany 30: -0.21% FTSE 100: -0.24% View the performance of all markets via https://www.dailyfx.com/forex-rates#indices https://t.co/alUPV1pWlu
Australian Dollar Spikes Lower as RBA Cuts Rates, Launches QE Program

Australian Dollar Spikes Lower as RBA Cuts Rates, Launches QE Program

Daniel Moss, Analyst

Australian Dollar, RBA Interest Rate Decision, Quantitative Easing, Coronavirus, Australia-China – Talking Points:

  • The Australia Dollar spiked lower against its major counterparts after the Reserve Bank of Australia cut the official cash rate and introduced a $100 billion QE program.
  • The progressive easing of restriction in Australia’s second most populous state may underpin AUD.
  • However, deteriorating Australia-China relations may cap the currency’s upside.
Advertisement

AUD Spikes Lower as RBA Cuts Rates

The Australian Dollar initially spiked lower against its major counterparts, as the Reserve Bank of Australia cut the Official Cash Rate (OCR) and target for the yield on the 3-year government bonds to 0.1%.

The central bank also introduced a $100 billion government bond purchasing program targeting “maturities of around 5 to 10 years over the next six months [and] remains prepared to purchase bonds in whatever quantity is required to achieve the 3-year yield target”.

However, Governor Phillip Lowe and the committee noted that “encouragingly, the recent economic data have been a bit better than expected and the near-term outlook is better than it was three months ago”, adding that “the outlook remains dependent on successful containment of the virus”.

This could suggest that further monetary easing from the RBA is off the table in the near to medium-term, if economic data and local health outcomes continue to trend in the right direction.

Nevertheless, the introduction of a $100 billion Quantitative Easing (QE) program could drag on the Australian Dollar in the near term, as attention shifts to the upcoming US presidential election and Federal Open Market Committee (FOMC) meeting later this week.

Australian Dollar Spikes Lower as RBA Cuts Rates, Launches QE Program

AUD/USD, ASX 200 futures 5-minute chart created using TradingView

Return to Normalcy to Underpin AUD

Australia’s relatively successful approach to the coronavirus pandemic could underpin the local currency against its major counterparts in the near term, as the nation records no locally acquired infections for the first time since June.

Indeed, recent fundamental data shows that the easing of restrictions in Melbourne, Australia’s second most populous state, is allowing the economy to accelerate its recovery from the March nadir, with the Ai Group Australian Performance of Manufacturing Index soaring to 56.3 (prev. 46.7) and job postings increasing by 9.4% (prev. -2.3%) in October.

The local housing market has also bounced back robustly on the back of the nation’s progressive return to normalcy, with new homes sales and building permit data for the month of September exceeding market expectations.

Australian Dollar Spikes Lower as RBA Cuts Rates, Launches QE Program

Moreover, Victorian Premier Dan Andrews could ease restrictions further in the coming weeks, as the nation’s second largest state records no new coronavirus cases or deaths for the fourth consecutive day and the 14-day moving average of infections falls to 1.9.

The next stage of the Premier’s ‘reopening roadmap’ requires the state to register no new community-acquired cases for at least 14 days.

Therefore, it appears the local currency could be poised to outperform if the current health trends persist and allow for additional relaxation of restrictions.

Australian Dollar Spikes Lower as RBA Cuts Rates, Launches QE Program

Escalating China Trade Tensions Could Unnerve Investors

However, escalating tensions with China may hamper the trade-sensitive AUD, as Beijing moved to block timber imports from Queensland and suspended barley trade with agricultural firm Emerald Grain.

As noted previously, these measures are the latest in a tit-for-tat exchange that has seen Australia’s largest trading partner impose 80% tariffs on barley exports, launch an anti-dumping and anti-subsidy probe into the country’s wine, and verbally ban imports of Australian thermal and coking coal.

Given China accounts for 40% of Australia’s exports, a marked deterioration in relations would have devastating consequences for the local economy and could possibly lead to $80 billion worth of iron ore exports falling into the Asian powerhouse’s crosshairs.

To that end, the development of this pivotal relationship should be intently watched by market participants, with a notable escalation in trade-based actions more than likely fuelling a period of risk aversion and in turn hampering the performance of the Australian Dollar.

Australian Dollar Spikes Lower as RBA Cuts Rates, Launches QE Program

Source – TradingEconomics

AUD/USD Daily Chart – Descending Triangle In Play

From a technical perspective, AUD/USD rates could be poised to move higher, as price continues to consolidate in a Descending Triangle pattern above range support at 0.7000 – 0.7020 and the 2011 downtrend.

That being said, with the RSI and MACD indicator travelling below their respective neutral midpoints, the path of least resistance seems skewed to the downside.

Nevertheless, with price tracking firmly above the sentiment-defining 200-day moving average (0.6956) a rebound towards the 61.8% Fibonacci (0.7131) seems in the offing, if buyers can hurdle the 100-DMA (0.7063).

A daily close above the October high (0.7158) would probably ignite a push to test the psychologically imposing 0.7200 mark.

Conversely, a break and close below the 0.7000 mark may ignite a more extensive pullback and bring support at the 2016 low (0.6827) into focus.

Australian Dollar Spikes Lower as RBA Cuts Rates, Launches QE Program

AUD/USD daily chart created using TradingView

-- Written by Daniel Moss, Analyst for DailyFX

Follow me on Twitter @DanielGMoss

How to Use IG Client Sentiment in Your Trading
How to Use IG Client Sentiment in Your Trading
Recommended by Daniel Moss
Improve your trading with IG Client Sentiment Data
Get My Guide

DailyFX provides forex news and technical analysis on the trends that influence the global currency markets.

DISCLOSURES