On Tuesday, the Reserve Bank of Australia cut its benchmark rate to the record-low of 1.75%. This is the first time in this year the bank has eased the monetary policy as it tried to subdue the appreciation of the currency.
The Australian central bank announcement has caused the AUD to drop more than one US cent to as low as $0.7567 due to the falling attractiveness of the Australian dollar to investors. The speculation of a possible cut had appeared among investors last week after Australian inflation slowed more than expected in the first quarter of the year.
Further, four of Australia’s biggest banks – National Australia Bank, Commonwealth Bank of Australia, Westpac Banking Corp and Australia, and New Zealand Banking Group, stated on Tuesday that they would cut variable home loan rates by 25 basis points after the central bank’s decision to cut the benchmark rate.
In New Zealand, employment data is due to be released tomorrow. The number of employed people in the first quarter of 2016 is expected to rise by 0.6%, while in the fourth quarter of 2015, the employment change was at 0.9%. The percentage of the total work force that is unemployed and actively seeking employment(in Q1 2016) is forecast to rise to 5.5%, up 0.2% compared to the previous quarter.
Fig. AUDNZD D1 Technical Chart
AUDNZD had been moving sideways around the resistance level at 1.13283 before witnessing a strong drop to as low as 1.08037. As indicated by the red SAR arrow, the price is likely to continue going down further. RSI is heading into the oversold zone, suggesting that the bear is overwhelming. The price is expected to hit the support level at 1.06639, the lowest level since the middle of February.
Buy Digital Call Option at 1.06639 valid until May 6, 2016
Buy Digital Put Option at 1.08037 valid until May 6, 2016.