AUD/USD at the downward trend line

05.11.2019 10:01|Conotoxia Ltd Analyst Team

Since the beginning of 2018, the Australian dollar has lost more than 18 percent compared to the US dollar, which meant that AUD has been one of the weakest currencies over the past two years. As a result, the AUD/USD has been at its lowest levels for a decade and only since October has it been trying to cover some losses.

Today in the morning AUD is the strongest currency among the world's major currencies and is gaining after the Reserve Bank of Australia (RBA) decision on interest rates. Although the RBA has left the main interest rate unchanged at a record low of 0.75 percent as expected and it is not expected that further cuts could be made. The market has previously thought of such a scenario that interest rates in Australia may fall to 0.5 percent at the end of the year. Now, this seems to be a much less realistic scenario, which may have a positive impact on the potential increase in the Australian dollar.

RBA Governor Philip Lowe said in a Tuesday statement that easing monetary policy has been supporting employment and income growth in Australia since June and is bringing inflation back to the medium term. Given the global developments, it is reasonable to expect that a longer period of low interest rates in Australia will be required to achieve full employment and the inflation target. The Board will continue to monitor developments, including in the labor market and it is ready to ease monetary policy even more if needed to support sustainable economic growth, full employment and achieving the inflation target over time, added the head of the RBA.

AUD also seems to benefit from the prospects of signing the first stage of the US-China trade agreement, Australia's largest trading partner. What's more, property prices have started to bounce back. Their strong decline was also a worry for Australians and RBA. Prices in Melbourne increased by 2.3 percent in October, noting the largest monthly increase in almost 10 years. In total, they increased by 6 percent from the lowest level in May. In Sydney, on the other hand, prices rose 5.3 percent since May.

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AUD/USD daily chart. Conotoxia trading platform

The AUD/USD exchange rate approached the key downward trend line, which begins at the end of 2018. If it is broken, then together with formed strong support in the area of 0.6686, the Australian dollar could potentially start rising more sharply. The first target could then be around 0.7080.


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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