RBA record interest rate cut reverberates across the markets

February 4, 2015

The Reserve Bank of Australia made a historical decision to cut its interest rate to 2.25%, a new record low. The bank has previously kept the rate unchanged for 18 months. The rate cut shows the bank shifting in its monetary policy to easing for the tumbled commodity prices. The Australian Dollar slumped to 0.7625 against USD immediately after the release, also dragging down the Kiwi Dollar to a refreshed recent low.

However, those two commodity currencies did not stay at lows for long. The Aussie Dollar recovered all the losses overnight and touched a day high of 0.7850 this early morning as the USD broadly declined against majors.

The AUDUSD left a long lower shadowed doji on the daily chart, but is still perfectly moving within the bearish channel. Bears can maintain their short-run short positions on the Aussie Dollar as long as the upper band of the channel has not broken.

AUDUSD 040215 | Vantage FX

The Canadian Dollar was the strongest currency among majors during the day. USDCAD dropped by 1.24% to 1.2408 as WTI extends its gains by 6%. The 1.24 support may not hold the pair for long and the rebound of CAD will continue.

USDCAD 040215 | Vantage FX

The Euro Dollar bounced by more than 1% overnight – the best performing day in over-3-months, and can be greatly attributed to the new Greece administration withdrawing demands of debt write-down. The market sentiment shifted to one of optimism with hopes that the Eurozone may work out a new agreement with Greek politicians. The tone on both side have turned to agreeable rather than confrontational.
Technically, the EURUSD is still in the adjustment and the area around 1.1530 is the strong resistance – the bottom of the last consolidation area and the 23.6% retracement level. The outlook remains bearish unless the pair reverses all the losses since QE announcement.

EURUSD 040215 | Vantage FX

Back to the stock markets, the Shanghai Composite rebounded 2.45% to 3204 after a five-day-streak of falling. The Nikkei Stock Average lost 1.27%. The Australian ASX 200 surged by 1.46% to 5707, inspired by the RBA’s rate cut. Western stock markets were supported by oil price bounce and Greece’s new proposal. In European markets, the UK FTSE was up 1.32%, the German DAX gained 0.58% and the French CAC Index rebounded 1.09%. The S&P 500 closed 1.44% higher to 2050. The Dow jumped 1.76% to 17666, and the Nasdaq Composite Index rebounded 1.09% to 4727.

On the data front, UK Services PMI data will be released at 20:30 AEDST. U.S. monthly ADP Non-Farm Employment Change will be out at 0:30 AEDST just after midnight.

Have a great trading day!
Anthony


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