AUD/USD is still sitting a little higher on the day, where does it go from here?
The aussie got a bit of a jolt higher as the RBA stepped up to the plate earlier today and delivered a 25 bps rate cut while also hinting at possibly more cuts to come:
"The global outbreak of the coronavirus is expected to delay progress in Australia towards full employment and the inflation target. The Board therefore judged that it was appropriate to ease monetary policy further to provide additional support to employment and economic activity. It will continue to monitor developments closely and to assess the implications of the coronavirus for the economy. The Board is prepared to ease monetary policy further to support the Australian economy."
The market has also priced in ~76% odds of a rate cut for next month already in hopes that the RBA will deliver next month as well.
However, with the cash rate at 0.50% and the RBA having said that the 0.25% level is their lower-bound, that means that there is only one more rate cut left in the drawer before the QE discussion comes into play. But that is a conversation for another day.
For now, the latest rate cut is helping to inject some confidence back in the market and is helping to pacify investors after the kicking and screaming over the past week.
That has helped the aussie to get a minor lift, but can it stay the course?
For AUD/USD, the pair is now back above the 100-hour MA (red line) but continues to trade under the 200-hour MA (blue line). That indicates the near-term bias is now more neutral and this is now the key battleground to determine where the aussie moves next.
I've been repeating over the past few weeks to start the year that the time isn't right to be catching the falling knife that is the aussie but perhaps things are changing now.
With central banks starting to come in to pacify the market, there may be room for a brief risk recovery - even if it may not last - and that could help the aussie keep higher.
I'd be more confident on a break above the 200-hour MA @ 0.6573 though and more so above 0.6600 before starting to chase a run higher in the currency pair.
But if investors are disappointed that central bank stimulus is not enough amid the ongoing virus outbreak across the globe, the run lower in the aussie looks like it has further to go and even more so with the RBA now having already expended one of its bullets.
In short, there is scope for the aussie to recover back above 0.6600 on global central bank stimulus and a change in near-term technical bias. However, that is unlikely to last so long as the virus outbreak continues to dampen the global economy over time.
