Aussie Rockets higher after RBA cuts rates to record low, announces new QE

The Australian dollar was trading 1.5% stronger on Tuesday, with the AUD/USD pair seen at around 0.7170 during the US session.

Earlier in the day, Australia's central bank cut interest rates to near-zero. It expanded its bond-buying program, as widely expected, in an attempt to ease the country's worst recession in a generation.

The RBA lowered its overnight rate by 0.15% to 0.1%, which should remain unchanged until inflation reaches 2-3%. Moreover, the central bank cut its three-year government bond yield target to 0.10%, and lastly, the RBA launched a new 100 billion AUD QE bond purchase program aimed at the 5-10Y segment of the government bond market.

Like everywhere else, the Australian economy is in a deep recession. Judging by the AUD/USD reaction, today's RBA actions were not sufficient, and the central bank needs to do more to debase its currency. 

However, we need to add that the US dollar has been sharply lower against other major currencies ahead of the elections, which prompted the rally in the AUD/USD pair as well.

The support is now seen at previous highs near 0.7160, and as long as the pair trades above it, the short-term outlook could be bullish. The next target for bulls will most likely be at October' highs of 0.7240.