Aussie Hits 6-Year Low On RBA
Today’s Spotlight Market
Traders are wondering when the pain will end for the Australian Dollar, after the currency suffers yet another setback. The Reserve Bank of Australia, or RBA, decided to slash interest rates overnight to 2.25%, a record low for the benchmark rate. This sent the Aussie Dollar plummeting well in excess of 100 ticks.? The currency has already been battered as the result of weak base and precious metal prices, so the lack of favorable interest rates could be seen as extremely bad news for the currency.
Fundamentals
The Australian economy has been the beneficiary of a close export relationship with China. For over a decade, Australia has done a bit better economically than Europe and the US as a result of being a raw resource based economy and China’s insatiable demand for raw materials. Now that China and other Southeast Asian trade partners are experiencing slowdowns, Australia has been struggling to find its footing. Despite this, the Aussie had been able to hold steady? in the low to mid 0.90?s for some time before beginning to falter due to favorable interest rates.? However, the state of the Australian economy could bring about additional rate cuts.? The RBA has, historically, cut rates in bunches and the current situation could give the bank every reason to do so.? Growth prospects are currently bleak and stimulus may be needed.? The FOMC is also expected to be raising rates? by mid-year, which could put more downward pressure on the currency versus the US Dollar. ?
Technical Notes? -? View Today’s Chart
Turning to the chart, we see the March Australian Dollar trending sharply lower since September of last year.? The Aussie is at a six year low, and prices are coming up on support at the 0.7699 level.? If prices fail to hold here, the next significant support level for the currency comes in around the 0.7285 mark.? The RSI indicator is showing oversold levels, which could be seen as supportive in the near-term.? Given the ferocity of the sell-off traders may be looking for consolidation rather than a reversal.
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