A 25bp cut during the night brought the Australian interest rate from 2,00% to 1,75% after an unexpected move by the RBA which surprises the market, not so strongly convinced of a cut during the todays meeting.
The measure was priced 60% by the markets which, despite this, react strongly, bringing down the AUD against all the major G10 currencies.
During the RBA spokesman’s speech there was no direct mention to the reason for the cut, but i suppose that the main one was the low inflation together with a mixed labour market.
Two different pairs that suffered the most from this event are AUD/JPY and AUD/USD which respectively loss 1,79% and 1,24%.
The first one is going to the lowest level since 2 months, after braking the 81 barrier and dropping more than 2 big figures in a few moments. Moreover this downside move is powered by the strength of the Yen, which at the moment is gaining ground also against the USD, bringing the USD/JPY pair to the 18 months low. During the next hours the cross direction shouldn’t change, and i don’t expect any reversal movement.
The significant levels on the downside could be seen at 80,00 and 79,75 (March low).
Similar situation for the AUD/USD pair which is trading at the moment @ 0,7565 and which, despite the small opening rally, is dropping 150pips, moving away every bull on the market.
The downside move should extend during the next hours and the next significant support could be seen at 0,7545 (27 April low).