Aussie Falls Sharply as RBA Leaves Options for a Rate Cut

The Australian dollar weakened sharply against the USD after the Reserve Bank of Australia (RBA) released meeting minutes. The minutes showed that officials were considering a rate cut if inflation did not move higher and unemployment rose. In these circumstances, officials said that a rate cut from the current 1.50% would be necessary. Presently, the unemployment rate is at an eight-year low of 4.9% while inflation is slightly below the 2% target.

Sterling was relatively unmoved in overnight trading as traders waited for the employment numbers. The unemployment rate is expected to remain unchanged at 3.9%. It has been at this level since February this year. The average earnings (ex-bonus) is expected to remain unchanged at 3.4%. The claimant count change is expected to decline to 20K, from the previous month’s 27K. The UK has two main challenges. Firstly, a no-deal Brexit will not be in its interest according to research by various entities. Secondly, the continued delay on the Brexit issue will lead to faded optimism among investors.

The earning season will continue today in the United States. Companies like Bank of America, Blackrock, Johnson & Johnson, Omnicom, Wipro, and UnitedHealth will release its earnings before the markets open. Others like Netflix, United Continental, CSX, and Interactive Brokers will release their earnings after the market closes. These results will come after the disappointing results from Goldman Sachs, whose profit of $2.25 billion was 21% lower than the same period a year ago. Its trading profit slowed by 18% from a year ago.

EUR/USD

The EUR/USD pair moved up slightly to a high of 1.1300 ahead of the ZEW economic sentiment. This price is higher than yesterday’s low of 1.1292. On the hourly chart, the pair’s price is close to the middle line of the Bollinger Bands while the MACD has crossed the neutral line. The momentum indicator has remained relatively unchanged. The pair could move up to the previous high of 1.1325.

AUD/USD

The AUD/USD pair declined sharply after the RBA left open the likelihood of a rate cut. The pair reached a low of 0.7138, which was the lowest level since Friday last week. It is also close to the 61.8% Fibonacci Retracement level. The decline led the RSI to reach the oversold level of 30. The Demarker too has moved further below the oversold level. There is a likelihood that the pair will resume the upward trend because the bank’s plan to cut rates was already expected.

GBP/USD

The consolidation of the GBP/USD pair continued ahead of the jobs numbers. The pair is currently trading at 1.3088, which is along the 25-day and 50-day moving averages. The symmetrical triangle continued to form, with the apex being close. The price is also along the 50% Fibonacci Retracement level. Therefore, there is a likelihood that the pair’s price will breakout in either direction.