AUD’s fall after Reserve Bank of Australia’s Interest Rate Statement

November 5, 2013 in Forex Fundamentals and News

AUD/USD's fallReserve Bank of Australia (RBA) kept the interest rate unchanged at 2.5% today as was expected. However the tone of the rate statement from RBA’s governor Glenn Stevens indicated uncertainties even though the overall statement can be considered as neutral.

Glenn mentioned that the overall global financial outlook remains quite accommodative. However, the Australian economy’s growth has been slightly below the trend and this trend is likely to remain same in the near-term, primarily because of the reduction in mining sector investments. The statement indicated expectations for the rise in private demand but also indicated that that there are considerable uncertainties about this outlook.

AUD dropped rather sharply after the statement. AUD/USD which had touched 0.9521 dropped to 0.9463 before finding some support at that level. AUD/JPY dropped from 93.86 to 93.13. The drop in AUD/CAD was from 0.9921 to 0.9880. On the charts the drops seemed quite sharp because of a very low volatility prior to the statement, even though otherwise the moves were not so significant.

Some of the credit of the weakness of the Australian dollar may go to the mention that RBA finds Australian dollar uncomfortably high and the board will continue to assess the outlook and adjust the monetary policy accordingly for a sustainable growth. However, the drop has been in line with the recent price-action. For past 7 trading days. AUD/USD has not been able to break above the psychological pull of 0.9500 and has been running sideways under 0.9525. Same is true with AUD/JPY which has also been running in a range between 92.67 and 93.97 for past 9 trading days.

AUD/USD after completing 38.2% retracement

AUDUSD comleted 1st level of retracement

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