On Tuesday the Reserve Bank of Australia lowered its benchmark rate to an all-time low of 2.5%. In his statement the Governor of the Reserve Bank, Glenn Stevens, said the Australian dollar “has depreciated by around 15% since early April, although it remains at a high level” and hinted at possible further easing. This put a bid under the Aussie Dollar ($FXA) as it caught support from a 2011 low near $89.
I’ve been watching the drop in $FXA as it broke through various support levels as traders kept the bearish bias on the currency from down under. In June I noticed that falling momentum had eased and was making higher lows as it diverged from price. However, price action kept the peddle to the ground as the down trend continued against the face of a rising Relative Strength Index.
We now are having our second test of the 50 level on the RSI as the indicator is still in a bearish range. Looking at the price chart we can see that $FXA is also up against its falling trend line after yesterday’s gap higher. Going forward I’ll be watching to see if price can break it’s downtrend on the back of rising momentum or if we treat it as resistance and continue lower.
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