The unsurprising surprise (depending on what side of the fence you were on) rate cut gave AUD/USD another kick in the crotch.
AUD/USD Monthly chart 03 02 2015
The next major level of note is the area around 0.7250/70 which marked the May 2009 break up and has been a historical support and resistance point. Beneath that we hit the Apr 2001 through 2008 support line at 0.7040/50
Looking a bit closer, the big figure at 0.7700 will be the first upside target, followed by the old lows of the last few days around 0.7720/30.
What strikes me about this rate cut is that it’s the second from a major resource country, following Canada. That’s not to say that they are directly linked but with Chinese growth coming into question again, and Canada’s close proximity to a US economy that is still not firing on all cylinders, we could well have the basis to see export dependant countries trying to dress up the shop window for their buyers. Whereas over the crisis rate cuts were generalised across the majors, these cuts are out on their own at a time when they should be on the rise or holding steady. It just shows the scale of the problems gripping the global economy nearly 10 years from the start of the GFC.
Australia has still got room to move from 2.25% but even so, it’s hard to boost growth when most of it is exported and even harder to suddenly try and turn to your domestic market to try and pick up the slack. A low price environment for commodities is bad news for resource countries and if prices stay depressed it’s going to be a tough time for them going forward. The currencies have been a one way trade for over a year and they may still have much much further to go.
