Australian Dollar Gains Following RBA Interest Rate Decision

Economic news (5 March 2013) – The Australian dollar advanced against its US counterpart after the RBA’s decision to keep interest rate unchanged at 3%, leaving room to further ease the policy, if necessary. The news gave the Aussie a serious rebound and it climbed to $1.0248 in early Tuesday trading, its highest level in nearly 10 days, after reaching the lowest level since July during yesterday’s session. At the time of writing, the Australian dollar was trading at $1.0240.

Since the beginning of the easing policy in November 2011, the RBA has reduced the overnight cash rate six times, setting the 3% benchmark in December.

Analysts commented that policy makers are highly likely to be dovish as they try to talk down the currency in order to revive growth and exports. Australia is one of the richest countries in terms of iron, gold and coal, and these commodities constitute a significant part of the nation’s exports and GDP. The price of iron ore has already recovered from its low levels in 2012, after China increased infrastructure spending and demand for the metal stabilised.

Meanwhile, the Aussie was supported further by a better-than-expected series of Australian economic data, something unseen on such a scale since the beginning of the year.

The retail sales report presented a surprise 0.9% growth for January, compared to a negative result of -0.4% from the previous reading. Another report revealed Australia’s current account deficit to be A$14.678 billion for Q4 of 2012, lesser than economists’ forecast for a deficit of A$15.35 billion. More positive data came from the ANZ Job Advertisements as it showed an increase to 3%, much higher than the forecasted 0.6%.

Looking further in the week, investors will be watching closely Australia’s Construction index for February, due on Wednesday, followed by the country’s Trade balance on Thursday.

Technical analysis

AUD/USD

At yesterday’s session the Australian dollar was moving in the range of 1.0110-1.0200. This morning the currency pair was trading at 1.0220-1.0235.

Should the Australian dollar successfully overcome the 1.0235-1.0250 resistance zone, its aim will be reaching and testing the 1.0270-1.0285 zone. If successful, the upward trend will continue to 1.0310-1.0330. If it falls below the support of 1.0225-1.0205, its next support zone is likely to be at 1.0190-1.0175. In case of a breakdown, the downward trend will continue to 1.0150-1.0130.

Australian Dollar Gains Following RBA Interest Rate Decision

Source: dfmarkets.co.uk

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