The Australian dollar continues to experience pressure from the external fundamental background. The devastating Chinese data published yesterday gave rise to a sell-off of AUD/USD, as a result of which the pair updated multi-year lows, testing the 60th figure. Below the 60th level, the aussie was only in the fall of 2008, at the height of the economic crisis. And apparently, sellers are ready to break this anti-record, especially given the rhetoric of the minutes of the last RBA meeting released today. Now everything depends on the behavior of the US currency, which is now in some prostration after a sharp reduction in the Federal Reserve's rate. The dollar index was hovering at the bottom of the 98th figure yesterday, and could not determine the vector of its further movement.
By and large, the market is now faced with a choice: either use the greenback again as a defensive tool, or trust the yen, given the aggressive policy of the Fed. If the second scenario is implemented, the dollar bulls will lose their positions in all pairs, including the AUD/USD pair. This fact will help to soften the blow that is likely to be inflicted by the Reserve Bank of Australia in the near future. If the dollar again spreads its wings, the question of testing the 59th figure will only be a matter of time.
But back to the RBA minutes. Let me remind you that at the March meeting, which took place on the 3rd, the Australian regulator lowered the interest rate to 0.5%. The RBA became the first regulator from the key central banks to decide to ease monetary policy. It was followed by the Fed, and then many other central banks.
The minutes of the RBA's March meeting made it clear that the regulator is ready for further interest rate cuts. Members of the regulator assessed the situation with the spread of coronavirus as "unprecedented" and, accordingly, has no analogues. In view of this fact, they reported that they are ready to further soften the parameters of monetary policy in order to support the country's economy. Members of the central bank also promised to provide the financial system with "sufficient liquidity".
The RBA is quite pessimistic about the prospects for the development of the situation. According to members of the central bank, the epidemic will not be curbed in the shortest possible time, so it will have a " significant negative impact on the economy." They forecast that Australia's GDP growth figures for the first quarter of this year will be "significantly weaker than forecasts." The tourism industry, air transportation, and education are under attack. At the same time, the central bank finds it difficult to assess how long the period of slowdown in the national economy will last. But at the same time, he expressed confidence that the period of low interest rates will be "long".
All this suggests that the Australian regulator will soon reduce the interest rate again. It is worth noting that at the moment, the RBA rate is the highest after the Bank of Canada (if you compare the Fed, ECB, Bank of Japan, SNB, Bank of England and RBNZ). Therefore, we can assume that the Australians will not wait for the next meeting (which is scheduled for April 7) and will announce their decision ahead of schedule and unscheduled, as their colleagues from New Zealand did recently.
In addition, the RBA recently announced its readiness to purchase government bonds – the head of the central bank, Philip Lowe, said that the regulator will begin quantitative easing on March 19, that is, this Thursday. According to him, the central bank will purchase Australian government bonds on the secondary market, "to support the normal functioning of this market." In addition, to ensure liquidity, the central bank will conduct repo operations for one and three months in its daily market operations- "until further notice". Philip Lowe also said that the Australian regulator will conduct longer repo operations with a six-month maturity or longer, at least weekly – "if market conditions require it."
Thus, regardless of the US currency's health, the Australian dollar will in any case be under some pressure due to the RBA's dovish intentions. If many central banks of the world have already reached their limit (within the framework of applying traditional measures), the Australian regulator still has room for maneuver. The minutes of the last RBA meeting and, in fact, the latest events in the world, indicate that the regulator is ready to use the available levers of influence.
From a technical point of view, the pair is under significant pressure, and on all higher timeframes. On the charts H4, D1, W1 and MN, the pair is located under the lower line of the Bollinger Bands indicator, which also indicates the priority of the downward movement. The pair shows a pronounced bearish trend, which is confirmed by the main trend indicators - Bollinger Bands and Ichimoku, which on all the above timeframes formed its strongest bearish Parade of lines signal – all the indicator lines are above the price chart, thereby demonstrating pressure on the pair. The nearest goal of the downward movement is the 0.6000 mark – a psychologically important, "round" support level that has not been available to AUD/USD bears for 12 years.
