The AUDUSD has extended its capitulation from coronavirus-induced risk-off sentiment, even as markets now eye the Reserve Bank of Australia (RBA) for expected action. This follows a weekend that saw coordinated interest rate cuts by the Bank of Canada, Bank of Japan, the Federal Reserve and the Reserve Bank of New Zealand.
The AUD is currently trading at 0.61104 or nearly 0.3% lower, well off intraday highs at 0.6302.
China’s economy and the Aussie Dollar are correlated, and today’s factory production data from China did a lot to accelerate the plunge of the Aussie Dollar. Factory production in China slumped to -13.5% (versus consensus of -3.5%), representing the most substantial drop in 30 years for this piece of data.
Continued risk aversion in the currency markets favour more bearishness on the AUDUSD, and this could be enhanced by easing action from the RBA as markets are expecting. Tomorrow morning, the RBA is expected to release its monetary policy minutes.
The AUDUSD is currently approaching the support at 0.60105, which was the low seen during the start of the global financial crisis of October 2008. A breakdown of this level brings the lows of July 1997 and April 2000 at 0.56577 into focus.
On the flip side, the markets may cheer any easing action of the RBA, and this may translate into a bounce off the 0.60105 support level, which targets the 0.63133 previous support-turned-resistance level where August 2003 and January 2009 lows are found. 0.65257 (Feb 2020 lows) could also come into the picture if the Aussie Dollar gets more reprieve in the markets.