AUDUSD Sells Off Despite More Rate Cuts from the Fed; Chinese Data Hugely Disappoints

AUDUSD is currently trading at its lowest levels since October 2008 despite the FOMC cutting rates over the weekend and following China’s disappointing data. As of this writing, the currency pair is at 0.6175. Earlier in today’s Asian session, it fell to a new 11-year low at 0.6095.

As my colleague Eno Eteng reported, the FOMC held another emergency meeting over the weekend. The interest rate decision-making body of the Federal Reserve slashed rates by 0.75% to 0.00%. Additionally, Fed Chairman Jerome Powell announced a $700 billion-asset purchase program to help support the economy amid the coronavirus outbreak.

This news should have been bullish for AUDUSD because it widens the money supply in the US. However, AUDUSD failed to sustain gains that may have been brought by this news for two reasons.

The first is that data from China, Australia’s largest trading partner, sorely missed expectations. Industrial production from December to February (excluding the Lunar New Year) printed at -13.5% and missed the 3.00% forecast. Meanwhile, retail sales declined by a whopping 20.5% versus the more modest contraction of 4.0%. The country’s unemployment rate also rose to 6.2% from 5.2%.

Secondly, there are speculations that the RBA may soon follow in the Fed’s footsteps when it is scheduled to make its interest rate decision. The RBNZ already cut rates. In a statement, the RBA said that it is ready to buy government bonds (aka QE or quantitative easing).

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AUDUSD Outlook

On the monthly chart, we can see that AUDUSD is nearing its November 2018 lows at 0.6075. If support at this level does not hold, the next support for the currency pair could be at 0.5660, where it bottomed in October 1998.

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Alternatively, if there are enough bids in the market at this level, we could see AUDUSD bounce. It could trade higher to 0.6315 where it may test the confluence of resistance. For one, this price coincides with the falling trend line when you connect the highs of March 9 and March 11. When drawing the Fibonacci retracement tool from the high of March 11 to today’s low, it can also be seen that this price coincides with the 50% Fib level.More content