The escalation of the trade war between the United States and China has strengthened expectations of a worsening situation in world international trade and the economy. The growth of fears about this caused a collapse of stock quotes and indices on world stock markets. Demand for safe haven assets, such as government bonds, yen, gold, has risen sharply. On Wednesday, gold prices exceeded $ 1,500 an ounce for the first time in six years. Since the beginning of the month, prices have increased by 6.9%, and from the end of May - by 15%. Yields on 10-year US Treasury bonds fell on Wednesday to 1.595% from 1.864% on Friday, to the lowest level since October 2016.
Last Wednesday, interest rates fell immediately by three central banks (India, New Zealand and Thailand). On Wednesday, the RBNZ lowered its official interest rate by 0.50% to 1.00%, which was the second rate cut this year.
As follows from the text of the RBNZ statement, "global economic activity continues to weaken ... increased uncertainty and reduced international trade contribute to lower economic growth in the trading partner countries ... and central banks relax monetary policy to support their economies".
The RBA last Tuesday left the key interest rate at a record low of 1%, but gave a pessimistic forecast for the economy. "It is reasonable to expect that a long period of low interest rates will be required to progress towards lowering unemployment and achieve steady progress towards the target inflation rate", Philip Lowe said on Tuesday.
At 23:30 (GMT) on Thursday, Lowe will begin speaking with members of the parliamentary committee on economics. If he points out that the key rate needs to be lowered again, then the Australian dollar will again be under pressure. In this case, the pair AUD / USD will again go “south” as part of a global downtrend.
At the beginning of the European session, the pair AUD / USD is trading near the level of 0.6787, correcting after falling on Wednesday.
Nevertheless, negative dynamics prevail, despite the correction. It is likely that the current position of AUD / USD and growth to the levels of 0.6800, 0.6816, 0.6830 will be a good opportunity to resume sales of this currency pair.
We can return to the consideration of long positions only after the growth of AUD / USD to the zone above the resistance level of 0.6910 (EMA200 on the 4-hour chart) with targets not higher than the key resistance level of 0.7065 (EMA200 on the daily chart).
In case of resumption of decline, the targets will be the support levels 0.6680, 0.6600. The distant target is located at support levels of 0.6260, 0.6000 (lows of 2008-2009).
Support Levels: 0.6745, 0.6700, 0.6680, 0.6600, 0.6300
Resistance Levels: 0.6816, 0.6830, 0.6865, 0.6910, 0.7000, 0.7065
Trading Recommendations
Sell by market. Sell-Limit 0.6800, 0.6816, 0.6830. Stop-Loss 0.6870. Take-Profit 0.6745, 0.6700, 0.6680, 0.6600, 0.6300
Buy Stop 0.6870. Stop-Loss 0.6810. Take-Profit 0.6910, 0.7000, 0.7065
