Home Fundamental Comment Australian dollar slides on rate cut expectations

Australian dollar slides on rate cut expectations

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Australian dollar slides on rate cut expectationsThe Australian dollar retreated against the U.S. dollar on Friday on mounting expectations the Reserve Bank of Australia would slash interest rates.

The Aussie rose on Thursday following the release of upbeat data showing unemployment dropped to a one-year low of 6.0 percent in May, as employers added 42,000 jobs.

After the release of the employment data, the AUDUSD climbed to a high of 0.7791 but then retreated to a hit a low of 0.7691.

Still, investors believe the RBA would cut interest rates further in the coming period to bolster economic growth, where the RBA would prefer to see its currency exchanged at 75 US cents.

“Further depreciation seems both likely and necessary, particularly given the significant declines in key commodity prices,” RBA governor Glenn Stevens has reiterated.

Worries from Greece also helped damped demand on the Aussie, as the International Monetary Fund had quitted talks in Brussels after they failed to reach a compromise deal with Athens.

Surprisingly, Australia’s neighbor, New Zealand, decided on Thursday to cut its official cash rate by 25 basis points to 3.25 percent.

AUDUSD

The AUDUSD slipped to a hit a low of 0.7689, falling from a high of 0.7756 as it faced resistance from the daily SMA 20.

The bearish crossover between SMA 20 and SMA 50 suggest there could be further drop in the pair, especially as the RSI 14 momentum indicator hovers below the 50-center line.

The pair faced some resistance after it did 23.6% Fibo retracement to the downside fall that started on May 14.

The AUDUSD will probably find support at 0.7600, while 0.7730 is the nearest resistance.

AUDUSD drops fxcomment

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Ahmed Mamdouh Ahmed Mamdouh, Co-Founder and Head of English Fundamental Analysis at FXComment.com, with 7 years of experience in the financial markets. Mamdouh holds a Master’s Degree in Economics from The American University in Cairo and a Bachelor Degree in Economics from The Faculty of Economics and Political Science, Cairo University.

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