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Australia’s Turn in the Spotlight

Australia Employment Change for February is due out in a few hours, with headline expectations of +10,000 jobs vs +13,500 jobs in January.  The unemployment rate for February is expected to remain unchanged at 5.3%.  As with most countries, this is usually the highlight economic data point for the month for Australia.  However, this month is different, as the fears of the coronavirus have taken hold of world economies, interest rates, currencies, and stock prices.  If Australia’s employment data follows the trend of the rest of the world, it will have little effect on markets ahead of the RBA emergency monetary policy meeting later.

In addition, the Reserve Bank of Australia (RBA) is due to release its quarterly Bulletin, which discusses economic and financial developments, as well as the Bank’s operations.  This may give some insight into the emergency announcement as well, which is due three hours later.

Central banks around the globe have been holding emergency meetings and slashing interest rates.  The Bank of Canada cut interest rates on Friday by 50bps in a surprise move.  The Bank of Japan was set to have their meeting today, however they moved it up to Monday to announce they would double the size of their ETF buying for JPY 12 trillion.  New Zealand likewise intervened on Monday and cut interest rates by 75bps to 0.25%.  Not the be outdone, the US Federal Reserve, which was supposed to have their meeting yesterday, jumped the gun and cut rates from 1.25% to 0% before the futures open on Sunday night.  The list goes on.  However, today is the RBA’s turn in the sun and they are expected to cut rates from a record low of 0.5% to 0.25%.  In addition, the RBA is expected to announce a QE program of their own. RBA Governor Philip Lowe will speak shortly afterwards.

AUD/USD is trading at levels not seen since early 2003, with the pair down 11% since the beginning of March, and 6.5% this week alone,  trading just under .5800. 

Source:  Tradingview, City Index

This move is primarily due to fear of the coronavirus and the flight to safety move into the US Dollar.   .5800/.5780 does provide a support zone from 2003, however as long as there is the bid in US Dollars, technicals probably won’t play as much of a role in determining price.  On a bounce, there is some horizontal resistance near .5960 and then at yesterday’s highs near .6028.

Source:  Tradingview, City Index

Although there is employment data, the RBA Bulletin, and an emergency RBA meeting shortly,  these factors many not have much of an effect on the AUD/USD.  They are most likely already priced in. 

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