The Australian dollar fell broadly today after the RBA hinted at further monetary easing next month. This is also exacerbated by ambiguous job data as well as weaker attitudes towards risk. Now it looks like US policymakers won’t agree to a new stimulus deal ahead of the elections.
US stocks have struggled to break record highs while Asian markets are also weakening. Today the euro is stronger, followed by the Swiss franc. For the week, the yen and dollar are now the strongest, while the Australian and euro are the weakest.
Technically, the Aussie is starting to look vulnerable as AUD/CAD appears to decisively break the 0.9409 support. This will confirm the beginning of the correction for growth from 0.8066 to 0.9696 with a target of 38.2% recovery.
After some unexpected volatility, AUD/NZD should also resume its corrective fall from 1.1043 to 1.0565 support. Support at 0.7095 on AUD/USD will be seen to confirm a return in short-term bearish sentiment. But the big level will be the resistance at 1.6586 on EUR/AUD.
RBA Governor Philip Lowe hinted in his speech that the central bank is ready to further ease monetary policy at an upcoming meeting in November. He noted that “as the economy opens up, it is reasonable to expect that further monetary easing will receive more support than there was before.”
Lowe also noted that considerations of financial stability “have changed somewhat.” To the extent that monetary easing helps people get jobs, it will help improve private sector balance sheets and reduce problem loans. In this way, risks to financial stability can be reduced. “
Lowe’s comments are in line with market expectations for another cash rate cut to 0.10%, with increased asset purchases over longer maturities.
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