The Reserve Bank of Australia has decided to lower its key interest rate by 0.25% to 0.75%. This decision was expected by the markets, but despite this, the Australian currency hardly moved in pairs with other currencies in the Forex market on Monday. This can be explained by the desire to wait for the resolution of the regulator following the meeting.
As we pointed out in a previous article, the RBA's decision to lower interest rates will put pressure on the Australian currency, but still, the most important is the bank's view of the future level of rates which is precisely the main reason for the weakness of the Australian currency.
In a published summary, he made it clear that a further reduction in interest rates is possible, if necessary. The regulator decided that it had reached a kind of "turning point", after which we should only expect lower rates. The reasons for this are the unused capacities of the national economy, suppressed inflationary pressures, which, according to the Central Bank, will continue for some time, as well as visible signs of a reversal in the real estate market and weakening activity in the country's construction sector.
Naturally, in the wake of such a statement, the Australian currency fell significantly against the US dollar and other major currencies. We believe that negative dynamics will continue in the short term and can be supported, especially in the pair with the US dollar, on the wave of the uncertain prospects for the Fed's monetary policy, which has stimulated the strength of the US dollar in the last few months.
We also believe that the New Zealand currency will also be under attack, which is also under pressure due to high expectations that the Reserve Bank of New Zealand will go along the RBA's path in an effort to weaken the national currency in order to achieve more competitive trading conditions on world markets.
Forecast of the day:
The AUD/USD pair reached our target level of 0.6700. We believe that it will most likely correct upwards after that, and at its possible growth, from about 0.6720. It can be sold again with the target of 0.6650. However, we also believe that if the price fixes below 0.6700, then it will resume falling to 0.6650 without any noticeable corrections.
The NZD/USD is trading below 0.6250. We believe that the RBNZ can also lower rates at the next meeting and make it clear that they will remain at low levels for a long period of time. Considering this, we believe that the pair will correct upwards to about 0.6250. It needs to be sold on growth with a possible target of 0.6185.
