Among the most important currencies in the world, the Australian dollar was gaining the most versus the US dollar this morning. As a result, the AUD/USD exchange rate is still trying to stay above the support set by the „flash crash" low in early January.
Investors were selling of the Australian currency, awaiting the dovish bias of the Australian central bank, which in June and July decided to lower interest rates by 25 basis points. At the time, such strong action was supported by the view that inflation would return to the 2 percent target in a longer period than previously expected. In turn, the country's economic growth was to be lower than previously forecast. It was further believed that the RBA would be ready to lower interest rates later in the year, because the escalation of tensions in the US-China trade war would pose a growing risk to the economy.
Meanwhile, a minutes was released tonight from the central bank meeting on August 6. In minutes, the RBA signals a better outlook for economic growth. The Reserve Bank of Australia has stated that tax cuts, infrastructure spending and the recent easing of monetary policy provide the opportunity for GDP growth. However, the Australian Central Bank will be ready to cut interest rates if it thinks that this action will actually boost economic growth. RBA also reviewed global experiences with unconventional steps in monetary policy.
AUD/USD daily chart. Conotoxia trading platform
On the daily chart, AUD/USD is still above the low, which was set by the „flash crash" that occurred at the beginning of the year. „Flash crash" is a very sharp drop in the price of a financial instrument most often caused by low liquidity on a given market along with the execution of automatic orders.
If the January low is defended, investors will be able to count on the very extensive double bottom pattern. This formation is usually a trend reversal pattern. Only beating the low from January would negate this pattern.
Daniel Kostecki, Chief Analyst Conotoxia Ltd.
Materials, analysis and opinions contained, referenced or provided herein are intended solely for informational and educational purposes. Personal Opinion of the author does not represent and should not be constructed as a statement or an investment advice made by Conotoxia Ltd. All indiscriminate reliance on illustrative or informational materials may lead to losses. Past performance is not a reliable indicator of future results.
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