RBA Sends Aussie Dollar Lower, Greenback Gains on Optimistic Trade Outcome

Nikolas Papas

Nikolas has been involved in the finance industry for over fifteen years spanning across Europe and USA with a depth of knowledge and experience within many aspects of the financial markets. Nikolas gained several years experience with some of the Europe’s leading Brokers, as equity analyst, and trader managing accounts for both Private and Corporate Investors. He enjoys both the fundamental and technical aspects of trading focusing on stock markets and all FX majors. Currently Nikolas provides analysis and comments to online financial publications. Educational background in Economics (BSc), and Finance (MSc).

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RBA sends Aussie Dollar Lower, Greenback gains

February 6, 2019

Indices closed higher in Asia following a late rally in Nasdaq as investors continue to wait on further developments in trade talks between China and US. In Tokyo, the Nikkei 225 edged 0.14 percent higher on Wednesday, and the Australian stocks continued to climb higher, to end a third straight session in positive territory. Australian main index ASX200 climbed 20 points or 0.3 percent to 6,026. It has been thin trading across the Asian region for the session with several markets closed for the ongoing Lunar New Year holiday. In commodities markets, gold is trading in a narrow trading range at $1313 while silver spot prices are hovering at 15.83. Crude oil gains 7 cents to $53.79, and Brent oil is also up 7 cents at $62.05. Greenback index is gaining momentum and is trading 0.12 percent higher at 96.19.

European markets entering the session in red after disappointing Germany factory orders with DAX losing 0.45 percent to 11,318 the CAC40 is down 0.37 percent lower to 5,064 and London is also trading lower at 7,152.

On the Lookout: Germany’s new industrial orders dropped by 1.6% month-on-month in December, from 0.2% MoM in November. Also, Germany industrial orders were down by 7.0% year-on-year. The drop was mainly driven by falling demand from non-eurozone countries and a small drop in local demand.

The Royal Bank of Australia governor Philip Lowe said that the central bank is moving away from rate hikes as he mentions that the ‘interest rate outlook is now more evenly balanced’, sending AUDUSD down 1.48 percent.

US session sees a string of economic releases from the US, including the trade balance, unit labor costs Q4 and good trade balance, all which will be released at 13:30 GMT. The Canadian building permits will drop in alongside the speech by the BOC member Lane, Canadian Ivey PMI for January at 15:00 GMT. The US government crude stocks data will be released at 15:30 GMT.

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AUDUSD Hourly (H1) Chart

Trading Perspective: The Australian dollar has fallen sharply following governor Philip Lowe’s speech revealing a switch to neutral rate outlook. The AUD slumped over 1 cent to 71.30 against USD. As of writing AUDUSD is trading 1.42 percent lower to 0.7132 canceling the bullish move from yesterday. The pair crushed the support levels instantly after trading stops were being triggered, and now is looking for support at the upper line of the descending channel at 0.71. Bulls now need to break above 0.7194 in order to gain some momentum and a chance to reach 0.7265 high from yesterday.

GBPUSD tried to stabilize around 1.2950 after yesterday’s 200 pips steep selloff as Theresa May will travel to Brussels to meet EU officials and announce a renegotiation of her Brexit deal on Thursday. The RSI has reached an oversold level, and a rebound can’t be ruled out, but now the bulls are on the sidelines. The pair needs to break above the 200-hour moving average to attract some solid buying. A strong resistance will be met at 1.3050 area where the 100-hour and 200-day moving averages are crossing. On the flipside, immediate support can be found at the 100-day MA around 1.2903 while a break below can force prices down to 1.28.    

GBP futures markets noted open interest shrunk by almost 4.5K contracts on Tuesday vs. Monday’s final 201,122 contracts. On the other hand, volume rose by 14.3K contracts for the first time after four consecutive drops.

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GBPUSD Daily Chart

EURUSD followed GBP lower after three-day consolidation at 1.1430 level. In the absence of negative news from the US government shutdown and US-China trade talks, the dismal macro figures from Eurozone pressures the common currency. Traders will closely watch the 1.1388 area which if failed to support the pair bears will send the price down to 1.13 at the yearly lows. On the upside, 1.1422 will act as resistance, and then more supply can be found at 1.1451 the 100-day moving average.

In Euro futures markets from CME Group, investors added nearly 1.9K contracts to their open interest positions on Tuesday from Monday’s final 522,906 contracts. In the same line, volume rose for the first time after two consecutive sessions, this time by almost 36.5K contracts.

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