Date: 02 Oct 2019

The Australian Dollar fell to its lowest trading level against the U.S dollar since March 2009 on Tuesday, after the Reserve Bank of Australia once again decided to reduce the nation’s interest rate.

The central bank slashed rates by twenty-five basis points, bringing the overall interest rate down to a record-low 0.75 percent.

The market reaction to the third interest rate cut in just five months saw the Australian Dollar falling back under the $0.6700 level against the greenback, while the ASX200 enjoyed its strongest trading day in over one-month, backed by an increase in trading volumes.
RBA Governor Phillip Lowe noted that the Australian economy was at a turning point, although he still felt the need to reduce the benchmark interest rate to further secure the expected recovery in the domestic economy over the coming months.

Governor Lower also said that slower job growth and muted inflation convinced RBA policymakers to act. The Australian housing market also received a notable mention inside the RBA policy statement, following a recent increase in Australian housing prices after a rapid decline in property values since the start of the year.

The central bank reiterated that it hoped that most large Australian banks would pass on the rate cut to reduce borrowing costs. Yesterday’s policy statement also included some dovish commentary, with the RBA adding that interest rates are likely to remain lower for longer and that policymakers still have scope to reduce the nation’s interest rate even lower than current levels.

The Reserve Bank of New Zealand is widely tipped to follow the RBA later this month and reduce interest rates, as the New Zealand economy faces many of the struggles that the Australian economy is currently dealing with.

 

 AUD/USD Daily Candlestick Chart| Source: ActivTrader

AUD/USD Daily Candlestick Chart | Source: ActivTrader

 

The Australian Dollar is unlikely to stage a strong recovery against the U.S Dollar until buyers move price above the $0.6845 level. Going forward the $0.6660 and the $0.6500 levels are the likely bearish target if weakness below the $0.6700 level persists.

 

Written by Nathan Batchelor, External Analyst, ActivTrades

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