Australia dollar crashes after dovish statement by the RBA
The Australian dollar declined sharply after the central bank introduced the probability of a rate cut. In a statement, the governor said that there were scenarios where the next move in interest rates was up and other scenarios where it was down. The statement came a day after the central bank left the cash rate unchanged at 1.5% and issued a hawkish statement. The Australian economy is facing challenges with increased personal debt and falling house prices in major cities. In the statement, he added that:
In the event of a sustained increased in the unemployment rate and a lack of further progress towards the inflation objective, lower interest rates might be appropriate at some point.
The price of crude oil was little moved in the Asian session as Saudi Arabia and its Persian Gulf allies tries to form a formal deal with Russia to manage the global oil market. This move is intended to put a floor on oil prices and reduce the chances of declining prices. This comes as the cartel is under increased pressure from the United States to keep prices lower by increasing production. In recent years, Russia has worked very closely with OPEC, including reducing supplies to lift prices. More deliberations on this will take place in Vienna next week.
Today, trader focus will be on the United States, which is set to release a bunch of data. The first reading of the Q4 GDP is expected to show that the economy rose by 2.6%, which will be lower than the expected 3.6% for the third quarter. The GDP price index is expected to have risen by 1.7%, higher than the previous 1.5%. The core durable goods orders are expected to rise by 0.2% after sliding by -0.3% in December. Housing starts are expected to be at 1.25 million, lower than the previous 1.256 million. The trade deficit for November is expected to decline slightly to $54 billion.
The AUD/USD pair declined sharply to an intraday low of 0.7150, which is below the 38.2% Fibonacci Retracement level. The pair’s sudden decline brought it to below the 25-day and 50-day EMAs while the RSI has moved sharply to the oversold territory of 21. The dovish statement from the RBA could push the pair lower to the 0.7130 level, which is also along the 21.6% Fibonacci Retracement level.
The EUR/USD pair continued moving lower and is now trading at the 1.1400 level, which is the lowest level since January 29. The pair is along the lower line of the Bollinger Band while the pair’s momentum indicator continues to remain below the 100 level. The MACD remains below the neutral line. While the pair could continue moving lower, caution should be taken because of important economic data from the US.
The price of Brent crude oil remained closer to yesterday’s low of 61.70. On the hourly chart, the pair is below the 25-day and 50-day EMA while the Parabolic SAR points to more downward movements. The DeMarker indicator has moved closer to the oversold level. Today, the pair will likely see some major movements as EIA releases inventory data and as investors discuss the formalization of OPEC+.