The Reserve Bank of Australia announced a new interest rate this morning of 1.5%. Market consensus as well as many analysts expected that the RBA would have a rate cut of 0.25%, from 1.75% to a record low of 1.50%. Sluggish inflation rate, falling house prices, labour market weakness, and appreciation of the Australia dollar put pressure on RBA to cut rates or further implement monetary easing measures.
Although the economic growth in Australia is more than the RBA’s estimate. However, the inflation is lower than the target. Although last QoQ headline CPI figure released on 27th July showed a rise of inflation rate to 0.4% in July from -0.2% in April. Yet the YoY headline CPI was disappointing in that it fell to 1.0% in July from 1.3% in April, which is a 17-year low for the Australian economy.
In addition, the labour market shows weakness. Also the house prices have slowed down in the major capital cities in Australia, only rising by 0.8% in July compared to a 6.1% rise last year, the slowest annual growth rate since September 2013.
As a result, investors turn to shares from fixed income. AUS 200 spot index has rallied 7.74% from 5213.40 points on 8th July to the 12-month high at 5616.90 points on 1st Aug, for the first time broke through 5600 points. On the Australia 200 spot daily chart, it has oscillating in an uptrend channel since this February. Yet the price pulled back after touching the uptrend resistance level at 5617. The price was above all the EMAs before the rate decision. Yet this morning the priced pulled back after the RBA announcement as market priced-out, breaking through the uptrend line support. It is currently trading around the daily time frame 8 EMA, the next support level is the 23.6% Fibonacci retracement level at 5470 followed by the daily time frame 20 EMA at 5464.
AUDUSD has been oscillating in a consolidation pattern since April. The rate cut this morning led to the falling of the Australian dollar, AUDUSD fell 1.67% this morning. Subsequently as the dollar weakened, the price bounced off after touching the significant support level at 0.75. It is currently trading above the level at 0.755.
The resistance level at 0.759 followed by the two uptrend lines at 0.7607 and 0.7643.
Downside uptrend line support level at 0.755 followed by two uptrend line at 0.7528, 0.75, 0.749 and 0.745.
Although the 4 hourly time frame KD indicator is still low, yet the one hour and daily time frame KD are at a high level, be aware of a pull back.
Keeping an eye on the trend of the dollar for monitoring the trend of AUDUSD.