The Australian dollar crumbled against the U.S dollar including all other currencies during this week’s trading session ending lower to making a 4-yrs low at 0.84788 after China’s central bank succumbed to political and market pressure and cut interest rates for the first time in more than two years, in a sign that the country’s leadership is leaning toward more sweeping measures to bolster flagging economic growth.
the central bank said it cut its benchmark one-year loan rate by 0.4 percentage point to 5.6%, making it cheaper for business to borrow in order to hire or expand and marking the first interest-rate cut since July 2012. The PBOC also reduced the benchmark one-year deposit rate to 2.75% from 3% but gave banks greater flexibility to raise deposit rates above that benchmark.
Weekly bias remains bearish as 21 and 55 EMA are still crossed to the downside with SSRC, MACD and RSI oscillators still showing bearish momentum is intact on the 4 hours, daily, weekly and monthly charts. Further decline to 0.83000 psychological zone is expected in the medium term picture if we get a break of 0.84788 supports. Further more an improving GDP from the U.S economy is showing signs of economic recovery and investors are anticipating an interest rate hike in the first quarter in 2015.
Key economic events to watch out for in the Australian and U.S economy this week are AUD Building Approvals, Retail Sales, Interest Rate Statement, GDP q/q, U.S ISM Manufacturing PMI, ADP Non-Farm Employment Change, Non-Farm Employment Change and Unemployment Rate.