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AUD/USD: The RBA lowered the benchmark interest rate today to 1.75% _03/05/2016

Technical analysis and trading recommendations -

According to the presented data last week, the annual core inflation was lower than expected and amounted to 1.7% (vs. + 2.0%, with growth of 2.1% in the previous quarter). The consumer price index (the CPI) in the first quarter also decreased (-0.2% vs. + 0.3%) and in the yoy growth amounted to + 1.3% (vs. + 1.8%).

Reducing the rate of inflation, combined with historically low wage growth jeopardizes the achievement of the set RBA inflation target range of 2% -3%.

It is possible that because of the weak data on inflation the central bank decided to lower the rate for the first time today since June 2015.
The decrease was a quarter of a percentage point to a level of 1.75%.

According to the bank, the Australian economy began to grow at a modest pace than in 2015, and the latest labor market indicators have become more controversial. In a statement, the RBA also said that the strengthening of the Australian dollar may complicate the correction in the economy.

It is clear that the way the Australian dollar began to disturb the country's exporters. For the Australian economy, oriented primarily for export, need cheaper the national currency. At a time when the Australian economy is trying to implement a reorientation from mining to other sectors, a sharp rise in the Australian dollar this year has created an additional threat to the growth of GDP.

However, the bank did not give a clear indication whether the second drop in rates this year. The risk of overheating of the housing market will keep the central bank from lowering interest rates next.

Although the AUD / USD pair fell by almost 2.0% to 0.7560 after the announcement of the decision of the Reserve Bank of Australia to lower the key interest rate, some market participants believe that the pair will soon be restored and it makes sense to revisit the long positions in the medium term. The Fed does not give clear signals to further increase interest rates in the United States, and rising prices of commodities, including iron ore, the main article of Australian exports, as well as the attractiveness of the Australian government bonds can cause new growth of the Australian dollar.

Tuesday, 03 May, 2016 / 10:30

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