Aussie tumbles on RBA rate cut

AUD / USD

Expected Range: 0.7330 - 0.7590

The Australian Dollar suffered a remarkable collapse through trade on Tuesday, shedding over 200 points after the RBA elected to cut the benchmark interest rate to record lows. Tumbling to its lowest level in 5 weeks the AUD touched 0.7486; 220 points below the 0.7711 bought prior to the announcement. Board members sighted inflationary pressures as the primary driver behind the decision to cut rates to 1.75% suggesting that a rate cut would support sustainable growth in the economy and the return of inflation to target. Plunging to 0.7550 in the immediate aftermath the losses were compounded by a selloff in commodity linked currencies as oil prices edged lower and concerns surrounding sluggish global growth begin to reignite. Having broken resistance at 0.7545 the AUD is now open to moves toward 0.7450 and 0.7330 with little in the way of technical support stopping a deeper downward correction. Attentions will now turn to Thursday’s retails sales and trade balance reports ahead of Friday’s critical non-farm payroll print for direction through the short to medium term.  

NZD / USD

Expected Range: 0.6810 - 0.7050

The New Zealand Dollar was forced lower through trade on Tuesday following a selloff in commodity linked currencies and renewed concerns surrounding the pace of global growth. The NZD slipped back below 0.70 losing some 130 points across the day touching intraday lows at 0.6915. The Kiwi followed its antipodean cousin lower after the RBA’s decision to reduce its benchmark cash rate pushed investors toward lower yielding and highly liquid currency alternatives. With little on the domestic docket attentions will be drawn to preliminary U.S employment and labour market data as markers for Friday’s critical Non-Farm payroll report. 

GBP / AUD

Expected Range: 1.9200 - 1.9600

The Great British Pound touched four month highs through trade on Tuesday breaching 1.4750 to tap 1.4775. Continued USD weakness has prompted a Cable recovery across the 4 months since the unit touched 7 year lows of 1.3860 in late February. Gains were however short lived and investors looked to short the Pound following opinion polls that suggested Britons would elect to leave the European Union. Recent gains have been capped by political pressures surrounding a possible Brexit. With attentions turning to domestic construction numbers for direction through Wednesday investors will be keenly focused on support and resistance points above 1.47 and below 1.45.   

USD, EUR, JPY

The Greenbacks collapse continued through trade on Tuesday touching 18 month lows against the Yen and 10 month lows against the Euro. Speculation the Bank of Japan will intervene to deflate the currency are undermining attempts to reinvigorate the economy and heightening concerns surrounding stagnant global growth.  The USD touched intraday lows at 105.52 marking a 12% depreciation through 2016 thus far. Investors are being drawn toward the safety of lower yielding, liquid currencies as commodity markets remain under pressure and monetary policy globally remains highly accommodative. Comments from San Francisco Fed President John Williams where in the FOMC board member backed a June rate hike failed to garner any real momentum but at least managed to arrest the depreciation. Bouncing of intraday lows the world’s base currency moved marginally higher edging back through 106.50 while the Euro slipped back below 1.16.  Attentions now turn to Preliminary Non-Farm payroll numbers and European Services data for direction through Wednesday. Investors will be keenly attuned to any data set that indicates an uptick in U.S employment and wage growth is on the cards as they position themselves ahead of Fridays wage growth report and Non-Farm payroll print, a poor read would all but eliminate the prospects of a June rate hike and likely induce another bout of USD shorting.