AUD/USD shrugs off softer than expected China data
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AUD/USD holds onto recovery gains above 0.6500 with eyes on RBA

  • AUD/USD stays positive ahead of the key event.
  • Risk reset took clues from speculations that G7 finance ministers and central bankers will provide stimulus.
  • Coronavirus fears prevail with fresh numbers keep suggesting speedy outbreak.
  • RBA is expected to keep the rate unchanged but surprises can’t be ruled out.

Following its recovery moves from the multi-year lows, mainly propelled by expectations of consolidated monetary/fiscal easing, AUD/USD seesaws around 0.6540 at the start of Tuesday’s Asian session. While expectations that the G7 leaders, mainly the Fed, will ease their current monetary policy in a response to the coronavirus (COVID-19) triggered the risk reset, Aussie traders now await the RBA’s interest rate decision, at 03:30 GMT, for fresh impulse.

Coronavirus-led easing?

During early Monday in Asia, news crossed wires, via Reuters, that a US bank lobby economist anticipates global rate cuts on Wednesday. The speculations gained further strength after news broke that the G7 finance ministers and central bankers will hold a teleconference.

However, some of the global central bankers, especially from the ECB, turned down any such expectations before taking a U-turn recently. As a result, traders are all but worried about today’s RBA rate decision to believe in the latest risk reset.

That said, the market’s risk-tone recovered from Friday’s carnage with the US 10-year treasury yields above 1.146% and Wall Street benchmarks marking more than 4% gains each.

Even so, coronavirus fears remain on the cards as a leap in cases from Italy as well as rising numbers from the US and South Korea continues to threaten the trade sentiment.

All eyes on RBA…

On the face of it, the Aussie central bank is not likely to announce any changes to its monetary policy but keep the tone in rate statement as bearish. However, given the current wave of coronavirus-led market pessimism, a surprise rate cut can’t be turned down.

“Today’s RBA cash rate decision marks the first central bank decision since global equities plunged and market expectations have shifted towards being on the verge of a synchronized global easing cycle. While we think the RBA is more likely to hold, a cut can’t be ruled out – it is more than fully priced in. Similarly, a cut is more than fully priced for the Fed’s 18 March decision,” said analysts at the Australia and New Zealand Banking Group (ANZ).

Read: RBA Preview: 25bp cut in the bag, 50bp cut possible, or a surprise hold and subsequent rally in AUD

Other than the RBA, Aussie housing market numbers and Current Account Balance will also be important to watch. On the other hand, investors will keep eyes on the Fedspeak as well as COVID-19 headlines for further direction.

Technical Analysis

The AUD/USD pair’s recovery moves failed to clear eight-day-old falling trend line, currently around 0.6550, which in turn signals fresh declines to 0.6500 and the latest low surrounding 0.6430. However, any further downside below 0.6430 will not hesitate to challenge March 2009 low close to 0.6280/85. On the upside, a clear break above 0.6550 will have 21-day SMA and February 08 low near 0.6650 and 0.6660 respectively as the following resistances to watch.

 

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