Summary of Lowe’s speech. Aussie is still moving up.
RBA Governor Lowe spoke earlier and here are the key points of his speech:
• It is legitimate to ask how effective monetary easing would be globally
• If everyone is easing, the effect on exchange rates is offset
The questions that Philip Lowe mentioned are quite important. We could say that Lowe hit the nail on the head. Here are the world banks’ interest rates:
USA FED 2.50%
Europe ECB 0.00%
UK BOE 0.75%
Swiss SNB -0.75%
Australia RBA 1.25%
Canada BOC 1.75%
NZ RBNZ 1.50%
Japan BOJ -0.10%
As we can see in all developed economies interest rates are low. But they aren’t able to provide stable consumption growth. In some way all big economies start resembling the Japanese, with deflation and aggressive central bank actions. Officials understand that there are no other possible ways to stimulate the economy other than taking different types of artificial steps (mostly QE steps). But as Lowe said ‘if everyone is easing…’.
RBA’s next meeting is on 2-nd July. The central bank decreased the interest rate by 25 basis points last time and we expect that monetary authorities will take a pause in its stimulus policy.
‘Aussie’ is still moving up – we think that it’s the US dollar that is actually the ‘trend-giving’ currency. Everybody is selling the American national currency with the expectation that the Fed will cut interest rates.
But from a technical point of view we think that the picture looks more attractive for bears rather than for bulls.
Technical analysis
On the 1W TF 200-EMA is moving down – the global trend is strongly bearish. The support level is approximately at 0.68270 – the pair tested this level several times in 2004 and 2016.
On Daily TF the price is approaching the local trend line. The resistance level is at 0.69700 (0.69750). As usual we have to consider two possible scenarios:
• The pair breaks this level up and continues to rise. Next targets for the price are 0.70190 and 0.70629.
• The pair bounces back from the trend line and starts falling down. The first target will be 0.69200.
Summary: we recommend to wait till AUD test the level 0.69750 and open positions depending on further price movement. We are waiting for Australian dollar to bounce back from its resistance line. Short positions are safer in this case.
• It is legitimate to ask how effective monetary easing would be globally
• If everyone is easing, the effect on exchange rates is offset
The questions that Philip Lowe mentioned are quite important. We could say that Lowe hit the nail on the head. Here are the world banks’ interest rates:
USA FED 2.50%
Europe ECB 0.00%
UK BOE 0.75%
Swiss SNB -0.75%
Australia RBA 1.25%
Canada BOC 1.75%
NZ RBNZ 1.50%
Japan BOJ -0.10%
As we can see in all developed economies interest rates are low. But they aren’t able to provide stable consumption growth. In some way all big economies start resembling the Japanese, with deflation and aggressive central bank actions. Officials understand that there are no other possible ways to stimulate the economy other than taking different types of artificial steps (mostly QE steps). But as Lowe said ‘if everyone is easing…’.
RBA’s next meeting is on 2-nd July. The central bank decreased the interest rate by 25 basis points last time and we expect that monetary authorities will take a pause in its stimulus policy.
‘Aussie’ is still moving up – we think that it’s the US dollar that is actually the ‘trend-giving’ currency. Everybody is selling the American national currency with the expectation that the Fed will cut interest rates.
But from a technical point of view we think that the picture looks more attractive for bears rather than for bulls.
Technical analysis
On the 1W TF 200-EMA is moving down – the global trend is strongly bearish. The support level is approximately at 0.68270 – the pair tested this level several times in 2004 and 2016.
On Daily TF the price is approaching the local trend line. The resistance level is at 0.69700 (0.69750). As usual we have to consider two possible scenarios:
• The pair breaks this level up and continues to rise. Next targets for the price are 0.70190 and 0.70629.
• The pair bounces back from the trend line and starts falling down. The first target will be 0.69200.
Summary: we recommend to wait till AUD test the level 0.69750 and open positions depending on further price movement. We are waiting for Australian dollar to bounce back from its resistance line. Short positions are safer in this case.