AUD/USD extends recovery from decade lows, eyes on 0.6750

• AUD/USD recovers above 0.6700 as risk-appetite improves.
• Aussie hit decade lows on aggressive RBNZ rate cut led Kiwi slump.
• An RBNZ 50 bps rate cut flagged more RBA easing.

The AUD bulls are rescued by a turnaround in the risk sentiment, as the US equity futures turned positive while the European equities firmed up, which added legs to the ongoing recovery in AUD/USD from 0.6678, the lowest levels since March 2009.

Antipodeans sold-off into aggressive central banks’ easing bias

The recovery in the commodity-currency can be also attributed to the ongoing rally in gold prices and the rebound in copper prices. Gold prices continue to benefit from rising trade and currency war fears that weigh down heavily on the US Treasury yields.

The spot took a sharp U-turn in the Asian trades and fell from day’s high of 0.6783 to hit ten-year lows after the Kiwi crashed on a bigger-than-expected rate cut announcement by the Reserve Bank of New Zealand (RBNZ). RBNZ cut its Official Cash Rate (OCR) by 50bps to a record low of 1.00%, as against markets’ expectations of a 25 bps cut.

Markets viewed that “the aggressive easing by the RBNZ will likely put pressure on the Reserve Bank of Australia (RBA) to ease further, having delivered 25 basis point rate cuts in June and July. As of now, the official interest rate in Australia is 1%. With RBNZ's aggressive easing, the market may begin pricing two or more rate cuts by the RBA before Dec. 31,” Omkar Godbole, Analyst at FXStreet noted.

Meanwhile, markets ignored the Australian home loans that declined by 0.9% in June, missing the estimated growth of 0.6% by a big margin. The immediate focus now remains on the Wall Street sentiment, fresh trade-related headlines and RBA policymaker Bullock’s speech for near-term trading impetus, as the US docket offers little of relevance. Further, Thursday’s Chinese trade data is likely to have a significant impact on the Chinese proxy, the AUD.

AUD/USD Technical Levels