Markets Brace for Another Australian Rate Cut

The disappointing inflation numbers for Australia did not just take down the Australian dollar (FXA). Financial markets also rushed to ramp up the odds of a rate cut in the next policy meeting for the Reserve Bank of Australia (RBA).


The likelihood of a rate cut in the RBA's May meeting has suddenly soared above 50%.
The likelihood of a rate cut in the RBA’s May meeting has suddenly soared above 50%.

Source: ASX RBA Rate Indicator

Even if the RBA takes a pass on a rate cut in May, futures markets are still pricing in a rate cut as early as July or August (pdf). The drop in the Australian dollar and the increased odds of a rate cut likely go hand-in-hand.

Against the U.S. dollar, the Aussie has found some support at the rising 50-day moving average (DMA). However, more importantly for larger market implications, the Aussie is still tumbling hard against the Japanese yen. The change in trading in GBP/AUD is made all the more dramatic by the recent change in trading behavior on the British pound (much more bullish!)


Can the rising 50DMA on AUD/USD sustain support for a suddenly weakened Australian dollar?
Can the rising 50DMA on AUD/USD sustain support for a suddenly weakened Australian dollar?

AUD/JPY is getting dangerously close to confirming a major technical breakdown from its 50DMA and 200DMA resistance.
AUD/JPY is getting dangerously close to confirming a major technical breakdown from its 50DMA and 200DMA resistance.

GBP/AUD has been the gift that kept giving (downtrend) - is the gravy train over?
GBP/AUD has been the gift that kept giving (downtrend) – is the gravy train over?

Source: FreeStockCharts.com

Be careful out there!

Full disclosure: long EUR/AUD, short GBP/AUD, short AUD/JPY

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