Market Outlook and Analysis (Oct2019 Week2)
Currency Pair: AUDUSD
Fundamental Analysis – AUDUSD
The RBA did indeed make a 25bps interest rate cut on Tuesday. Pushing the AUDUSD down to test the lows at 0.6670 (around the Aug lows). The RBA is expecting to implement further cuts towards 0.25% by 2020. However, the market sees that cuts in an extremely low rates will have minimal effect on the economy.
The Australian banks are encouraged not to be too overly cautious over the current lending policies. The rate cuts have prompted the big four banks to cut mortgage rates by 0.13-0.15%
The NFP employment data came in slightly weaker than expected (+136k vs expected +145k). The Aug figures were revised from 130k to 168k. The September unemployment dropped from 3.7% to 3.5%. This gave the USD a slight boost.
Technical Analysis – AUDUSD
AUDUSD D1 Chart – Bounced off 2019 lows
After the RBA rate cut, the AUDUSD tested and bounced off the 2019 lows and steadily rallied for the next 2 consecutive days towards an intermediate minor resistance level. Will be looking towards the next trading week to see how it tests and reacts to this resistance level again.
AUDUSD H4 Chart – Challenging a minor Resistance level.
The pair did bounce off the 2019 lows with a Bullish RSI Divergence. The RBA rate cuts was a distraction to my trading week, the dovish rate cut fundamentally was conflicting with my idea to go long. (See last week’s analysis on AUDUSD). Hence, I didn’t take the trade.
In this next up and coming trading week. I would like to see the pair decisively break above the resistance levels to go long. Else we could see a test of the lows again as the Bears dominate the pair.
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