RBA Cuts Rate by 25 bps, AUDUSD Hit Monthly Lows
Recent reports from China about the rise in coronavirus cases has shifted the market’s attention away from central bank speeches. Over the past 12 hours, we have had three central bank chiefs make statements: RBNZ Governor Adrian Orr, RBA Governor Philip Lowe, and BOC Governor Stephen Poloz. Here’s the lowdown on their remarks and technical setups on NZDUSD, AUDUSD, and USDCAD.
In a speech before the Finance and Expenditure Committee, RBNZ Governor Orr expressed his confidence in the bank’s current monetary policy. He acknowledged that the coronavirus outbreak would weigh down trade, finance, and confidence. However, he said that policymakers do not see any need to ease given the current situation. He went on to say that the outbreak would only have a significant effect on growth if it lasted for a sustained period.
On the 4-hour time frame, we can see that NZDUSD has pared some of its gains back to the 38.2% Fib level (when you draw the Fibonacci retracement tool from the low of February 11 to the high of February 12). If risk aversion lingers, we could see the currency pair fall further to support at the 61.8% Fib level at 0.6420. This price also coincides with a broken trend line which may offer NZDUSD with support.
On the other hand, the hammer which already formed at the 38.1% Fib level could be a signal that there are willing buyers in the market. A close above the hammer’s high at 0.6467 could mean that NZDUSD may soon resume its rally to resistance at 0.6575 where it could test the 200 SMA.
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RBA Governor Lowe seemed more concerned with the coronavirus, saying that it has an uncertain impact on the economy. However, he did note that sans the outbreak, the economic outlook is improving. He also said that China’s efforts to stimulate its domestic economy could also be beneficial for Australia’s too
On the hourly time frame, AUDUSD has made a lower high after a series of higher highs. Consequently, a head and shoulders pattern has formed. This is considered as a bearish reversal signal. A close below the neckline support at 0.6710 could mean that a sell-off to 0.6660 could soon ensue. On the other hand, if support at the 200 SMA and neckline holds, we could see AUDUSD trade higher. A close above today’s highs at 0.6740 would invalidate the bearish chart pattern. It could suggest that AUDUSD may soon rally to its February 6 highs at 0.6760.
Unlike his counterparts, BOC Governor Poloz did not make any remarks about the coronavirus in his recent speech. He described the Canadian economy being in a good place. For its resilience, he credits the government’s fiscal stimulus efforts. According to him, rates in Canada would have been so much lower if not for them.
On the daily time frame, USDCAD is testing its previous trend line for support (by connecting the highs of September 3, October 10, and November 26). This price, around 1.3250, also coincides with the 23.6% Fib level when you draw the Fibonacci retracement tool from the low of December 31 to the high of February 10. Reversal candles around this area could mean that USDCAD may soon retest this week’s highs at 1.3330. If there are enough buyers, the currency pair could even trade to its May 2019 highs above 1.3500. On the other hand, if market sentiment improves, USDCAD could drop to 1.3180 and test the 100 SMA for support.