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Forex Market: AUD/USD hits a one-month low on stronger US Dollar, RBA’s Debelle lists Forex intervention, negative rates as policy options

AUD/USD extended losses from the prior trading day and touched a fresh one-month low on Tuesday, as the US Dollar remained firm near a six-week high, while Reserve Bank of Australia Deputy Governor Guy Debelle listed several policy options, including currency market intervention and negative interest rates, which the RBA was considering to achieve its inflation and employment objectives.

In a speech earlier on Tuesday, Debelle said that foreign exchange intervention was one of the assessed options, but still, it was not certain if it would prove to be effective because the Aussie dollar was “aligned with fundamentals.”

Meanwhile, the US Dollar strengthened against a basket of six major peers at the start of the week on pandemic-related concerns and worries over US stimulus delays, with markets now eyeing the appearance of Federal Reserve Chair Powell and US Treasury Secretary Mnuchin at a congressional committee later on Tuesday.

“There was a flight to safety into the greenback and bonds from the sell off in equities,” strategists Philip Wee and Duncan Tan at DBS Bank wrote in an investor note.

“Sentiment will remain weak if (Powell and Mnuchin) fail to break the congressional deadlock to another round of fiscal stimulus.”

As of 7:51 GMT on Tuesday AUD/USD was retreating 0.48% to trade at 0.7188, after earlier touching an intraday low of 0.7178, or a level not seen since August 25th (0.7150). The major pair has retreated 2.52% so far in September, following five consecutive months of gains. Year-to-date, AUD/USD was up 2.47%, with support drawn from higher prices of iron ore, Australia’s top export.

On today’s economic calendar, at 14:00 GMT the National Association of Realtors will report on US existing home sales. Sales probably rose to a seasonally adjusted annual level of 5.98 million units in August compared to July, according to market consensus. In July, sales of previously owned houses were 24.7% higher from a month ago to reach 5.86 million, or the highest level since December 2006.

And at 14:30 GMT Federal Reserve Chair Jerome Powell is expected to testify with Treasury Secretary Steven Mnuchin before the House Financial Services Committee on the topic of “Oversight of the Treasury Department’s and Federal Reserve’s Pandemic Response”.

Bond Yield Spread

The spread between 2-year Australian and 2-year US bond yields, which reflects the flow of funds in a short term, equaled 8.8 basis points (0.088%) as of 6:15 GMT on Tuesday, up from 7.8 basis points on September 21st.

Daily Pivot Levels (traditional method of calculation)

Central Pivot – 0.7249
R1 – 0.7298
R2 – 0.7374
R3 – 0.7423
R4 – 0.7473

S1 – 0.7173
S2 – 0.7124
S3 – 0.7048
S4 – 0.6972

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