Is the AUD/USD About to Make a Run at the Lows?
Rowan Crosby • 1 min read
The Aussie has had a bit of a rough week to say the least and the door is certainly looking to be wide open for another run at the lows.
The headline act this week, was RBA Governor Lowe’s speech, where many thought he would give a clear indication that rate cuts were on the way. That wasn’t the case and the odds of a cut were reduced by around 5% t round about 70%.
That said, the big investment banks continue to weigh in with most now stating an October cut is the clear winner.
The other comments coming out of UBS today, was that they felt the RBA was shocked by the slowdown in the economy. The jobless rate has of course been the key factor for the RBA for some time and it is in-fact pushing higher, not lower. Which will obviously be a troubling statistic for them.
So as each day passes it looks like we will see another 25bp cut in October and that will take the OCR to a new-record low of 0.75%.
So what does this mean for the AUD/USD?
Clearly the most recent lows have to be the new target. If rates are at record lows, it stands to reason that the Aussie must be trading pretty close to its lowest level. So that stands at 0.6700 at the moment.
The Aussie was once again weak overnight as Trump impeachment headlines dominated the risk-off trade, but they seem to be a case now of the boy who cried wolf.
Given that we have strong resistance at 0.6800 I feel that selling any small bounce here would be a solid plan, with a view to taking profits into a run of 0.6700. We want an entry that will make this more like 3:1 risk reward, not 1:1, so bare that in mind.