Because the Australian economy is a base metal exporting economy, Australia’s GDP relies on China so much, as China goes, the Aussie dollar goes.
Prior to 2019 the Reserve Bank of Australia didn’t cut interest rates in three years. That all change earlier this year. A couple of months ago, RBA cut rates for the second time in consecutive months.
Australia's central bank cut its benchmark interest rate by a quarter of a percentage point on Tuesday to a record low of 1% in a bid to boost the economy.
Several months ago, BlackRock Inc. said they were shorting the Australian dollar on a bet the central bank will continue to cut interest rates to as low as 0.5% to revive the struggling economy. Around that same time, the Commonwealth Bank of Australia, the nation’s biggest lender, revised its RBA forecast to predict two more rate cuts this year.
Two nights ago, the RBA didn’t disappoint.
Australia’s central bank was dragged further into the global easing tide as it cut interest rates for the third time this year.
The Reserve Bank reduced the cash rate by 25 basis points to a record-low 0.75% and said it may ease even further, venturing deeper into levels where unconventional measures may need to be adopted.
“The global race to the bottom is, in a sense, dragging the RBA along,” said Michael Blythe, chief economist at the Commonwealth Bank of Australia. “Failure to participate could see the Australian dollar move higher.”
So where is the Aussie Dollar headed next, lets go to the charts?
Monthly Chart (Curve Time Frame) - monthly supply is at 0.7125 and monthly demand is at 0.6100.
Weekly Chart (Trend Time Frame) – the trend is down.
Daily Chart (Entry Time Frame) – potential supply is forming, but the trade set-up is only if price can closed below the wicks first.
This post is my personal opinion. I’m not a financial advisor, this isn't financial advise. Do your own research before making investment decisions.
