The Aussie found support this morning at RBA’s decision, to cut rates by 25 basis points and lowering them to +0.50% in an effort to assist the economy from the Coronavirus outbreak. In the accompanying statement the bank stated that it will ease policy if needed to support sustainable growth and that coronavirus has clouded the near term outlook for the global economy. In the bank’s opinion, it’s still too early to tell how persistent the effects of the coronavirus are to be and that it will monitor developments in the labour markets, albeit the corona virus could delay progress on jobs and inflation. The bank also stated that the Australian economy’s growth this year will likely be “noticeably weaker”. It should be noted that the bank expects that once the Coronavirus is contained the Australian economy will return to an improving trend. AUD jumped around 50 pips upon the release of RBA’s interest rate decision, breaking above the 0.6530 (S1) resistance line, now turned to support. We maintain our bearish outlook for the pair, as it remains below the downward trendline incepted since the 21st of the month. Should the sideways movement of the past 24 hours continue, the pair technically could be in a make or break position, testing the prementioned downward trendline. Should the pair be under the selling interest of the market, we could see it breaking the 0.6530 (S1) line and aim for the 0.6490 (S2) support level. Should the pair’s long positions be favoured by the market, we could see the pair breaking the 0.6575 (R1) line and aim for the 0.6615 (R2) resistance level.
USD weakens against EUR, on interest rate differentials
The USD weakened against the EUR yesterday, as interest rate differentials tended to provide support for the common currency versus the greenback. Despite both central banks implying that their respective banks are to take some action to support their economies, investors seem to consider that the ECB has less room to cut rates as it is allready at 0.0%, while the Fed’s rate has currently a target of +1.5%-+1.75%, with more room to ease. Analysts underscored the above and also mentioned the possibility of the Fed proceeding with a deeper rate cut of 50 basis points in its March meeting. It should be noted that President Trump, in a tweet yesterday, once again ,b>criticized the Fed for having high rates and not taking any action to lower them. Also, there are wide discussions among analysts for the possibility of a coordinated monetary policy action and news could break out as soon as today as G7 finance ministers and central bank governors are to have a conference call to discuss possible measures for the economic impact of the Coronavirus. EUR/USD rallied yesterday, breaking consecutively the 1.0600 (S2) and the 1.1115 (S1) resistance lines now turned to support and continued higher to test the 1.1170 (R1) resistance level, yet corrected lower later on. We expect the upward movement to continue, as the slope steepens. It should be noted that the RSI indicator in the 4-hour chart is at the reading of 70, confirming the bull’s dominance, yet at the same time could imply an overcrowded long position for the pair. Should the bulls maintain control over the pair, we could see it breaking the 1.1170 (R1) resistance line and aim for the 1.1230 (R2) resistance level. On the flip side should the bears take over, we could see it breaking the 1.1115 (S1) support line and aim for the 1.0600 (S2) level.
Other economic highlights today and early tomorrow
Today during the European session, we get Switzerland’s GDP growth rate for Q4, Turkey’s CPI rate for February, Eurozone’s preliminary HICP for February and Eurozone’s unemployment rate for January. From the US, just before the Asian session starts, we get the API weekly crude oil inventories figure. In the Asian session, we get Australia’s GDP rate for Q4, Japan’s Services PMI for February and China’s Caixin Services PMI for February. As for speakers ECB’s De Guindos, BoE’s Governor Mark Carney, Cleveland Fed President Mester and Chicago Fed President Evans speak.
AUD/USD 4 Hour chart
Support: 0.6530 (S1), 0.6490 (S2), 0.6450 (S3)
Resistance: 0.6575 (R1), 0.6615 (R2), 0.6650 (R3)
EUR/USD Daily chart
Support: 1.1115 (S1), 1.0600 (S2), 1.1000 (S3)
Resistance: 1.1170 (R1), 1.1230 (R2), 1.1285 (R3)
