5 Nov 2013
AUD/USD declines as RBA uncomfortable with $A levels
FXstreet.com (Barcelona) - AUD/USD is trading with an offered tone after the RBA left rates unchanged at 2.5% while keeping its monetary policy statement neutral, despite warning that the Aussie continues to show uncomfortably high levels.
The RBA stated: "The Australian dollar, while below its level earlier in the year, is still uncomfortably high. A lower level of the exchange rate is likely to be needed to achieve balanced growth in the economy."
The initial reaction in the AUD/USD has bee selling over 30 pips, as traders price into the pair the latest warning, despite the jawboning is nothing new, with RBA Stevens having successfully talked down the Aussie last week too.
From a technical perspective, the AUD/USD has been developing a meritorious upward recovery after consistent selling pressure since sellers stepped in above 0.9750 to inflict some serious technical damage to the pair short term.
However, part of that tech damage is likely to be restored should the pair regain 0.9520/30 area, allowing for an extension towards 0.9570 (Oct 25 low).
Traders should note that the increase in volatility ahead of 0.94 lows recently is a communication that firm bids keep absorbing the selling interest, with a break of the bearish structure through 0.9520/30 critical. On the downside, topside failure to sustain above 0.95 sees 0.9440/50 as an important support area ahead of last week's low.
Overnight Index Swaps remain near flat in a 12 months horizon, which basically implies that no further tightening is expected.
According to Adam Button, US-Lead Editor at Forexlive: "Historically, that’s would mark a big change. The bottom of the rate cutting cycle in 2008-2009 lasted only 5 months and the 2000-01 cycle trough was just four months." Button speculates that if signs of a pick up in the economy are given near term, "the Australian dollar could start to price in hikes sooner", he said.
The RBA stated: "The Australian dollar, while below its level earlier in the year, is still uncomfortably high. A lower level of the exchange rate is likely to be needed to achieve balanced growth in the economy."
The initial reaction in the AUD/USD has bee selling over 30 pips, as traders price into the pair the latest warning, despite the jawboning is nothing new, with RBA Stevens having successfully talked down the Aussie last week too.
From a technical perspective, the AUD/USD has been developing a meritorious upward recovery after consistent selling pressure since sellers stepped in above 0.9750 to inflict some serious technical damage to the pair short term.
However, part of that tech damage is likely to be restored should the pair regain 0.9520/30 area, allowing for an extension towards 0.9570 (Oct 25 low).
Traders should note that the increase in volatility ahead of 0.94 lows recently is a communication that firm bids keep absorbing the selling interest, with a break of the bearish structure through 0.9520/30 critical. On the downside, topside failure to sustain above 0.95 sees 0.9440/50 as an important support area ahead of last week's low.
Overnight Index Swaps remain near flat in a 12 months horizon, which basically implies that no further tightening is expected.
According to Adam Button, US-Lead Editor at Forexlive: "Historically, that’s would mark a big change. The bottom of the rate cutting cycle in 2008-2009 lasted only 5 months and the 2000-01 cycle trough was just four months." Button speculates that if signs of a pick up in the economy are given near term, "the Australian dollar could start to price in hikes sooner", he said.