The Australian Dollar closed sharply lower last week as global equity markets went into a freefall last week as the ever-spreading coronavirus sparked fears of a potential global recession. The move encourage investors to raise the chances of a rate cut by the Reserve Bank of Australia on Tuesday. The move by the RBA may be necessary to soften the impact of the decline.
Last week, the AUD/USD settled at .6506, down 0.0121 or -1.83%.
Policymakers will meet on Tuesday, a day ahead of the release of the latest quarterly economic growth figures, which economists expect will again show a sluggish expansion, even before the outbreak of COVID-19.
According to the latest money market data, the RBA will reduce the cash rate to a fresh record low of 0.5%. Early last week, the money markets were saying there was virtually no chance of a rate cut, but all of that changed during last week’s rout of the U.S. equity markets.
Monthly Technical Analysis
With the AUD/USD hitting its lowest level in 11 years last week, the best chart to watch at this time or until the Forex pair forms a support base on the daily chart is the longer-term monthly chart.
The monthly chart indicates momentum is clearly to the downside. If the momentum continues then look for sellers to make a run at the October 2008 main bottom at .6008.
A series of rate cuts or even quantitative easing from the RBA, combined with the increasing possibility of a global recession, should keep a cap on gains, and could fuel further weakness.
This article was originally posted on FX Empire
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