Post-RBA blues

Following yesterday’s RBA rate ‘surprise’, we are now starting to see the local currency’s weakness resume yet again.

AUD
Source: Bloomberg

AUD/USD hit $0.7711 yesterday and is just starting to slump again, trading at $0.7640. While markets got the timing of the cut wrong, it is clear we still have an easing bias and a rate cut is still likely on the way.

Reasons for not cutting have been centred on macroprudential concerns on housing and an argument around how much of a difference further cuts will make. Yesterday’s strong retail sales reading was also overlooked to an extent as they showed strong consumer demand, particularly in household goods and food.

This is also consistent with strong housing demand as people tend to stock up on electrical goods when they move into a new property or renovate. One of the main reasons the pair gave up some gains was also due to a reinvigorated greenback.

However, the pair seems to be finding some buyers off the lows and, from a price action perspective, perhaps the biggest development was a break of the rejection of the 38.2% retracement at $0.7690. Until the pair can close above this level, I feel sellers will continue to look for shorting opportunities.

Click to enlarge

This information has been prepared by IG, a trading name of IG Markets Limited. In addition to the disclaimer below, the material on this page does not contain a record of our trading prices, or an offer of, or solicitation for, a transaction in any financial instrument. IG accepts no responsibility for any use that may be made of these comments and for any consequences that result. No representation or warranty is given as to the accuracy or completeness of this information. Consequently any person acting on it does so entirely at their own risk. Any research provided does not have regard to the specific investment objectives, financial situation and needs of any specific person who may receive it. It has not been prepared in accordance with legal requirements designed to promote the independence of investment research and as such is considered to be a marketing communication. Although we are not specifically constrained from dealing ahead of our recommendations we do not seek to take advantage of them before they are provided to our clients. See full non-independent research disclaimer and quarterly summary.

Spread bets and CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. 79% of retail investor accounts lose money when trading spread bets and CFDs with this provider. You should consider whether you understand how spread bets and CFDs work, and whether you can afford to take the high risk of losing your money. Spread bets and CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage.