AUD/USD holds weaker but key near-term levels are still offering support

Technical Analysis

Author: Justin Low | audusd

AUD/USD downside remains limited by the key hourly moving averages

AUD/USD H1 14-03
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At least that remains the case for now. The aussie is once again weaker on yields play as mentioned yesterday here as traders/investors are favouring the dollar in Asian trading, which is also one of the reasons touted for the move higher in USD/JPY.

For AUD/USD, the confluence of the two key hourly moving averages will be the main support level for the pair along with the 0.7050 level. A fall below that will see the near-term bias turn more bearish and open up a move back towards the 0.7000 handle; minor support is seen around 0.7020-25.

Another reason that is said to be dragging the aussie lower today is that the bank bill swap rates are slowly coming off again. Since the RBA outlook has grown towards favouring rate cuts now, there has been a dramatic decline in said rates since February.

AUD BBSW
The rates are approaching early 2018 levels and that will now start to raise questions about domestic banks' lending rates as funding costs are beginning to move lower beyond what they were when the banks first increased it (or at least the "Big Four") in August last year.

This will be something to watch out for because if banks start to scale back on their lending rates, it at least eases the burden on consumers but it is also a sign that markets are starting to err even more towards a rate cut bias.

That said, I wouldn't count on domestic banks' reacting all too quickly. It's one thing to raise lending rates when their margins are being squeezed. But when their margins are growing as costs dwindle, there will be many "meetings" and "action points" before rates are lowered.

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