3 May 2016
AUD/NZD drops sharply towards 1.08 after RBA rate cut
AUD/NZD has fallen over 150 pips from highs of the day, currently exchanging hands circa 1.08, following the somewhat surprising decision by the RBA to cut rates y 25bp to 1.75%.
The Reserve Bank of Australia notes in its statement that "prospects for sustainable growth in the economy, with inflation returning to target over time, would be improved by easing monetary policy at this meeting."
RBA added: "In reaching today's decision, the Board took careful note of developments in the housing market, where indications are that the effects of supervisory measures are strengthening lending standards and that price pressures have tended to abate."
AUD leveraged community caught wrong-sided
If RBA wanted to pick the best time to get the most 'bang for their buck', by cutting interest rates today, it has snowballed the bearish momentum in the Aussie, with lots of money committed on Aussie longs by leveraged accounts having to bail out or trapped and in the process of trying to get out of their positions. By cutting rates, the RBA has also re-established some loss credibility on central banks, following recent inaction by both the Bank of Japan and the Federal Reserve in their policies.
AUD/NZD key levels
On the downside, the immediate support for the pair is found at 1.09 round number, followed by today's S3 line at 1.0785 ahead of 1.0750 mid round number. On the upside, 1.0850 (support turned resistance) is the first resistance to be faced, ahead of 1.0870 and 1.09 psychological area. Given the easing action by the RBA, which was against most consensus, bounces should be quite shallow.
The Reserve Bank of Australia notes in its statement that "prospects for sustainable growth in the economy, with inflation returning to target over time, would be improved by easing monetary policy at this meeting."
RBA added: "In reaching today's decision, the Board took careful note of developments in the housing market, where indications are that the effects of supervisory measures are strengthening lending standards and that price pressures have tended to abate."
AUD leveraged community caught wrong-sided
If RBA wanted to pick the best time to get the most 'bang for their buck', by cutting interest rates today, it has snowballed the bearish momentum in the Aussie, with lots of money committed on Aussie longs by leveraged accounts having to bail out or trapped and in the process of trying to get out of their positions. By cutting rates, the RBA has also re-established some loss credibility on central banks, following recent inaction by both the Bank of Japan and the Federal Reserve in their policies.
AUD/NZD key levels
On the downside, the immediate support for the pair is found at 1.09 round number, followed by today's S3 line at 1.0785 ahead of 1.0750 mid round number. On the upside, 1.0850 (support turned resistance) is the first resistance to be faced, ahead of 1.0870 and 1.09 psychological area. Given the easing action by the RBA, which was against most consensus, bounces should be quite shallow.