Market Brief: Asian Stocks Steady; AUDUSD Plunges on RBA Emergency Rate Cut Expectations

RBA Cuts Rate by 25 bps, AUDUSD Hit Monthly Lows
RBA Cuts Rate by 25 bps, AUDUSD Hit Monthly Lows

Asian Equities Steadier Today

Japanese and Australian stocks posted modest gains in today’s trading after a few days of aggressive selling. The Nikkei 225 was up by 0.06% at 17,011.46. Meanwhile, the ASX 200 had a 5.83% profit for the day at 5,293.4. Meanwhile, the Hang Seng Index is still open. It is, however, trading higher by over 0.40% at 23,161.1.On the other hand, the Shanghai Composite Index was in the reed by 0.34% at 2,779.641.

Aside from New Zealand announcing a massive stimulus program, there was no significant development on the coronavirus pandemic. The country launched a fiscal stimulus equivalent to 4% of its GDP to ensure that there is enough liquidity in the economy.

With this being said, today’s gains in the Asian equities markets could be nothing more than investors feeling some headline fatigue. For the past couple of months, market sentiment has been dictated by the coronavirus. Aggressive selling could easily resume on news that the pandemic is getting worse.

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AUDUSD Hits New 11-Year Lows on the RBA

Meanwhile, AUDUSD sharply traded lower in today’s Asian session. The currency pair even tapped its lowest level since October 2008 at 0.6064. The Aussie often shares a positive correlation to improving market sentiment. However, AUDUSD was heavily weighed down today by the RBA.

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For one, the RBA meeting minutes revealed that the central bank is keen on easing rates even further. Remember that two weeks ago, they had already cut rates from 0.75% to 0.50%. The minutes showed that policymakers have grown increasingly worried of the effects of the coronavirus pandemic on the economy. They acknowledged that fiscal stimulus measures by the government would help provide liquidity along with monetary stimulus.

With this and following the emergency rate cuts by the Federal Reserve and RBNZ over the weekend, the RBA is expected to follow suit. Some analysts say that the central bank may move its monetary policy decision this week instead of its actual schedule on April 7. It is anticipated that RBA Governor Lowe will announce another 25 basis point-rate cut and a quantitative easing program.

AUDNZD Outlook

The sharp drop in AUDUSD makes it difficult to find a suitable entry. However, AUDNZD may offer the opportunity to jump in on the Aussie downtrend. On the hourly time frame, it can be seen that the currency pair has recouped some of its gains back to the 50% Fib level (when you draw the Fibonacci retracement tool from yesterday’s high to its intraday low). Reversal candles have formed around this area, at 1.0120, which hints that a drop could soon ensue.

However, it’s worth pointing out that AUDNZD still has some room to trade higher and still maintain its downtrend. By connecting the lows of March 12, March 13, and March 16, it can be seen that the currency pair could test trend line resistance at 1.0150. This price also coincides with the 61.8% Fib level.

Be wary of a strong bullish close above this price because it would invalidate this bearish bias on AUDNZD. It could instead mean that the currency pair is on its way to near-term resistance at 1.0225.More content