AUD/USD – Aussie Dives After RBA Rate Cut

AUD/USD has posted sharp gains on Tuesday, as the pair trades just shy of the 0.77 line in the North American session. The Aussie took a hit after the RBA surprised the markets with a rate cut to 2.25%. Building Approvals posted a sharp loss of 3.3%. In the US, today’s highlight is Factory Orders. The markets are bracing for a sharp decline of 1.8%.

With the Australian economy continuing to struggle, there had been talk of the RBA cutting interest rates, but the experts didn’t expect any move until later in the year. The RBA had different plans, and shocked the markets with a 0.25% cut, lowering rates from 2.50% to 2.25%. RBA Governor Glenn Stevens noted that the Australian currency remains overvalued and that the economic growth will remain low. The Australian dollar has reacted with a sharp drop of over 100 points on Tuesday.

Australian inflation indicators continue to point to weak inflation levels. Last week, the Producer Price Index edged down to 0.1%, short of the forecast of 0.3%. Earlier in the week, Australian CPI, the primary gauge of consumer inflation, dropped to just 0.2% in Q4, shy of the forecast of 0.3%. This was the index’s weakest gain in two years. However, there was much better news from Trimmed Mean CPI, which posted a strong gain of 0.7%, beating the estimate of 0.5%.

On Friday, US Advance GDP for Q4 disappointed, posting a gain of 2.6%. The markets had anticipated a gain of 3.0%. Still, market sentiment towards the US economy remains positive, underscored by the Federal Reserve statement last week, where the Fed noted solid growth in the economy. The Fed remains on track to raise rates later in 2015, and the dollar will likely benefit as speculation continues over the timing of a rate hike.

AUD/USD for Tuesday, February 3, 2015

AUD/USD February 3 at 13:30 GMT

AUD/USD 0.7704 H: 0.7832 L: 0.7626

 

AUD/USD Technical

S3 S2 S1 R1 R2 R3
0.7403 0.7582 0.7684 0.7799 0.7904 0.8081

 

  • AUD/USD plunged in the Asian session, testing support at 0.7684. The pair was steady in the European session and has edged higher in North American trade.
  • 0.7799 is the next resistance line.
  • 0.7684 is a weak support level.
  • Current range: 0.7684 to 0.7799

Further levels in both directions:

  • Below: 0.7684, 0.7582, 0.7403 and 0.7265
  • Above: 0.7799, 0.7904, 0.8081, 0.8150 and 0.8214

 

OANDA’s Open Positions Ratio

AUD/USD ratio is pointing to gains in short positions on Tuesday, reversing the directions seen a day earlier. This is consistent with the movement of the pair, as the Aussie has recorded huge losses. The ratio is close to a split between long and short positions, indicative of a lack of trader bias as to what direction the AUD/USD will take next.

AUD/USD Fundamentals

  • 00:30 Australian Building Approvals. Estimate -4.8%. Actual -3.3%.
  • 00:30 Australian Trade Balance. Estimate -0.85B. Actual -0.44B.
  • 3:30 Australian Cash Rate. Estimate 2.50%. Actual 2.25%.
  • 3:30 Australian Rate Statement.
  • 15:00 US Factory Orders. Estimate -1.8%.
  • All Day – US Total Vehicle Sales. Estimate 17.0M.

*Key releases are highlighted in bold

*All release times are GMT

OANDA MarketPulse Nominated for FXstreet’s 2015 Forex Best Awards

We are pleased to share the news that FXstreet – Europe’s oldest forex trading portal, published online in more than 50 countries – has nominated your MarketPulse team for the “Best Sell-Side Analysis Team” award again this year (the winners in 2014!), as well as in the category of “Best Analysis”.

The annual Forex Best Awards highlight the best analysis, educational content, and contributors on its website from the preceding year. It is a tremendous honour to be considered for this industry accolade out of the thousands of top tier banks and financial blogs online.

However, in order to win these important awards, we need your help – we need you to vote for us.

This article is for general information purposes only. It is not investment advice or a solution to buy or sell securities. Opinions are the authors; not necessarily that of OANDA Corporation or any of its affiliates, subsidiaries, officers or directors. Leveraged trading is high risk and not suitable for all. You could lose all of your deposited funds.

Kenny Fisher

Kenny Fisher

Currency Analyst at Market Pulse
Kenny Fisher joined OANDA in 2012 as a Currency Analyst. Kenny writes a daily column about current economic and political developments affecting the major currency pairs, with a focus on fundamental analysis. Kenny began his career in forex at Bendix Foreign Exchange in Toronto, where he worked as a Corporate Account Manager for over seven years.