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Australian Dollar Remains Unchanged After RBA Rate Cut: Market Response and Future Projections

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  • February 18, 2025
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The Australian Dollar has remained unchanged after the Reserve Bank of Australia’s (RBA) equally expected move of reducing the Official Cash Rate by 25 basis points to 4.10%, its first rate cut in four years. Although RBA Governor Michele Bullock acknowledged the effect of high interest rates, she warned against presuming additional rate cuts. The AUD/USD currency pair was supported by a softer US Dollar, with downtrodden US retail sales and Federal Reserve officials being cautious on rate cuts. At the same time, the rise in US Treasury yields supported the US Dollar, making it tough for the Australian Dollar. The market sentiment remains centered around significant support and resistance levels, with AUD/USD supporting an uptrend channel, indicating a positive bias.  KEY LOOKOUTS • Governor Michele Bullock indicated doubt regarding additional rate cuts, with future economic data being pivotal in deciding the next step by the central bank. • Fed officials emphasize caution on rate cuts with inflation worries, with US economic data being pivotal in informing future monetary policy. • Increasing US Treasury yields may make the US Dollar stronger, potentially capping AUD/USD gains despite the Australian Dollar’s strength following the RBA decision. • The duo is bullish in an uptrend channel, testing resistance at 0.6400 while important support is close to the 14-day EMA at 0.6300. Australian Dollar stability after the RBA’s rate cut confirms the market’s expectation of the move, and traders are now looking to see what future policy steps are ahead. While RBA Governor Michele Bullock hinted at indecision about further reductions, US Federal Reserve officials stuck to a wait-and-see approach, pointing to ongoing inflation threats. Increases in US Treasury yields have underpinned the US Dollar, which has made headwinds for AUD/USD even in its bullish path within an upward channel. The Australian Dollar held firm following the RBA rate cut, with investors looking to policy cues in the future. The increase in US Treasury yields, on the other hand, supported the US Dollar and proved difficult for AUD/USD. • The Reserve Bank of Australia lowered its Official Cash Rate by 25 basis points to 4.10%, the first rate cut in four years. • The Australian Dollar did not react much since the rate cut decision had already been priced in by traders before the announcement. • Governor Michele Bullock highlighted that additional rate cuts are in doubt, mentioning robust employment and persistent inflation issues. • Higher US Treasury yields supported the US Dollar, placing downward pressure on AUD/USD even after its post-RBA bounce. • Fed officials flashed warning signals for rate cuts, citing inflation threats and calling for greater economic clarity. • AUD/USD is still in an uptrend channel, with important resistance at 0.6400 and firm support at 0.6300. • US retail sales figures, Federal Reserve actions, and China’s economic policy are still driving Australian Dollar market sentiment. The Australian Dollar stabilized after the Reserve Bank of Australia (RBA) as anticipated cut the Official Cash Rate by 25 basis points to 4.10%. RBA Governor Michele Bullock insisted that although high interest rates have touched the economy, it is still premature to speculate about more cuts in interest rates. The Australian “Big Four” banks of CBA, NAB, ANZ, and Westpac also followed by cutting their lending rates promptly. The most recent inflation figures reported a deceleration in price pressures as Trimmed Mean CPI increased 0.5% last quarter, down from the anticipated 0.6%. Non with standing this, the robust labor market and conservative RBA approach mean that another round of rate cuts is not certain, keeping market participants on their toes for subsequent economic releases. AUD/USD Daily Price Chart TradingView Prepared by ELLYANA At the same time, US Dollar found strength in increasing Treasury yields, curbing AUD/USD’s up potential. The Federal Reserve still holds back on reducing interest rates, with policymakers citing ongoing inflation threats and desiring greater certainty before altering monetary policy. The USD was dented by dismal US retail sales figures temporarily before AUD/USD could recover partially. Still, with the US Dollar Index (DXY) rallying and Treasury yields on the rise, the Australian Dollar has resistance around 0.6400. The pair currently is trading inside an upward trend channel, important support being in place at about 0.6300, making economic statistics in the pipeline as well as remarks by the central banks crucial to its immediate next direction. TECHNICAL ANALYSIS AUD/USD pair trades in an uptrend channel, signifying the overall market bullish tendency in the near term. The pair also received support around the nine-day Exponential Moving Average (EMA) of 0.6316 and the 14-day EMA of 0.6300. The Relative Strength Index (RSI) is still above the 50 mark, indicating positive momentum. The pair meets resistance on the upside around the top edge of the channel at 0.6390, with an important psychological level at 0.6400. A breach above the level would herald more gains, while a decline below the support line of approximately 0.6280 may suggest a reversal. Investors will be looking out for these key levels for indication of a trend breakdown or a breakout. FORECAST The Australian Dollar remains in a bullish bias as long as it continues to trade in its rising channel, with the next resistance being at 0.6390 and the critical psychological level of 0.6400. If the pair is able to break above 0.6400, this may set further upside momentum into play, the next target being at 0.6450. Supportive reasons for the upward movement are a soft US Dollar, which could come under stress if economic indicators indicate that the Federal Reserve might ease monetary policy ahead of time. Also, any indication of strength in the Australian economy, especially in labor market data or inflation management, could support the AUD and bring further advances. AUD/USD has critical support at 0.6316 (nine-day EMA) and 0.6300 (14-day EMA). A breakdown below these levels may drive the pair to 0.6280, which is the lower end of the ascending channel. In case of a further increase in selling pressure, the next key support is at

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Currencies GBP/USD

GBP/USD Falls Before UK Labor Market Figures: Most Important Factors Contributing to the Market Decline

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  • February 18, 2025
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GBP/USD has fallen around 1.2600 before important UK labor market figures, ending its five-day streak of gains. Traders expect an increase in unemployment and claimant count, which may weigh on the British Pound. UK PM Keir Starmer’s demand for a “US backstop” in a Ukraine peace agreement also brings geopolitical uncertainty. On the American side, the Dollar rallies on increasing Treasury yields and dovish Fed comments, with policymakers reiterating that inflation threats remain. From a technical point of view, GBP/USD is approaching major support at 1.2600, with additional selling potential if numbers are disappointing. Investors are closely watching UK job data and Fed policy cues for the next move. KEY LOOKOUTS • UK labor figures are awaited by traders, as the unemployment rate is predicted to increase to 4.5%, influencing GBP/USD. • UK PM Keir Starmer demands any peace agreement for Ukraine should come with a “US backstop” to prevent future Russian incursions. • Higher US Treasury yields and hawkish tone of Fed policymakers maintain the US Dollar strong, exerting pressure on GBP/USD. • Fed Governor Michelle Bowman cautions against ongoing inflation risks, proposing additional data should be seen before cuts in interest rates. GBP/USD comes under selling pressure, falling around 1.2600 as market participants look forward to pivotal UK labor market information. The anticipated increase in unemployment and claimant count might act as a drag on the British Pound. In the meantime, UK Prime Minister Keir Starmer stressed the importance of a “US backstop” in any peace deal for Ukraine to discourage further Russian aggression. Conversely, the US Dollar strengthens as Treasury yields rise, buoyed by dovish comments from Fed officials. Fed Governor Michelle Bowman cautioned that inflation risks remain, indicating that more clarity is required before rate cuts can be considered. These together form the near-term direction for GBP/USD. GBP/USD falls close to 1.2600 as markets await UK labor figures, where unemployment is anticipated to increase. Meanwhile, the US Dollar firm up due to higher Treasury yields and dovish stance of Fed officials regarding inflation. UK PM Keir Starmer’s demand for a “US backstop” in peace negotiations for Ukraine brings in geopolitical risk. • The duo falls to around 1.2600 prior to the highly important UK labor market numbers, snapping its five-day success run. • The jobless rate is expected to climb to 4.5%, while the claimant count should increase by 10K, which will influence GBP sentiment. • UK PM Keir Starmer emphasizes that any peace agreement for Ukraine must be accompanied by a “US backstop” to prevent Russian aggression in the future. • The US Dollar Index (DXY) bounces back on the back of surging Treasury yields and hawkish Fed comments, putting pressure on GBP/USD. • Fed Governor Michelle Bowman reiterates ongoing inflation threats, emphasizing added clarity is necessary before rate cuts are on the cards. • Investors hold back following Fed Governor Waller’s concession of slower inflation gains, adding to doubt on monetary policy action. • Geopolitical tensions and economic uncertainty propel GBP/USD volatility, and investors are focusing intently on forthcoming data announcements. GBP/USD has declined close to 1.2600 prior to the release of UK labor market data, bringing an end to its five consecutive days of advances. Investors closely observe the job numbers, which are anticipated to increase the unemployment rate to 4.5% and to grow the claimant count by 10K. A weaker-than-expected labor market could weigh further on the British Pound, adding to its recent decline. Meanwhile, UK Prime Minister Keir Starmer emphasized the need for a “US backstop” in any Ukraine peace deal to prevent future Russian aggression, adding a geopolitical dimension to market sentiment.  GBP/USD Daily Price Chart TradingView Prepared by ELLYANA On the American side, the Dollar is strengthening on the back of rising Treasury yields and cautious comments from Federal Reserve officials. The US Dollar Index (DXY) has risen after three consecutive days of decline as 2-year and 10-year Treasury yields are at 4.27% and 4.51%, respectively. Fed Governor Michelle Bowman has cautioned that inflation risks are still high and cautioned against moves to cut rates before more clarity is evident. In the same vein, Fed Governor Christopher Waller recognized sluggish progress in curbing inflation, cementing doubt about future policy action. All these factors combined point to GBP/USD’s bearish risk as investors wait for crucial economic indicators. TECHNICAL ANALYSIS GBP/USD is confronted with short-term support around the 1.2600 psychological mark, with a further drop possibly challenging the 1.2570 and 1.2530 support levels. A fall below these levels may create room for a more significant pullback to 1.2500. On the positive side, resistance is observed at 1.2650, followed by the recent high at 1.2700. The Relative Strength Index (RSI) is also turning down, reflecting bearish momentum, while the 50-day moving average at 1.2620 may serve as a dynamic resistance. Traders will be observing if GBP/USD can maintain above crucial support levels or continue its downside move in the face of fundamental pressures.  FORECAST If the UK labor market data surprises positively, showing resilience in employment figures, GBP/USD could regain strength. A better-than-expected jobs report might boost investor confidence in the British economy, pushing the pair towards the 1.2650 resistance level. If buying momentum continues, the next upside target would be 1.2700, followed by 1.2750, where significant resistance lies. Also, any dovish indications from the Federal Reserve for upcoming rate cuts may bring down the US Dollar, which will help propel a GBP/USD recovery. Conversely, if UK jobs data fail to impress with rising unemployment and an increased claimant count, GBP/USD may witness selling pressure. A fall below the important 1.2600 support could see further declines towards 1.2570 and 1.2530. Further, a more hawkish US Dollar, fueled by Fed hawkish commentary and an increase in Treasury yields, may hasten the losses. Should bearish pressure continue, GBP/USD might fall to the 1.2500 psychological support, testing 1.2450 in a protracted downtrend.

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Currencies USD/JPY

Japanese Yen Rises on BoJ Rate Hike Bets: Can USD/JPY Hold Above 153.00?

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  • February 5, 2025
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The Japanese Yen (JPY) remains bullish against the US Dollar (USD), having touched a one-month high due to increasing prospects of a rate hike by the Bank of Japan (BoJ). Strong growth in real wages and picking up the pace of inflation in Japan argue for more monetary tightening than possible rate cuts from the Federal Reserve due to slowing US job market data. Therefore, the divergence of policy outlook reduces the Japan-US rate differential, enhancing demand for the JPY. However, risk-on sentiment and the potential for US tariffs on Japan in its imports curtail further upside. Traders have now pivoted to the US ADP report and ISM Services PMI for intraday market guidance, and USD/JPY is due to challenge the 153.00 level and key technical supports. KEY LOOKOUTS • Stretched real wages and inflation in Japan strengthens prospects for additional BoJ rate increases, underpinning the Japanese Yen against the US Dollar. • A weakening US job market increases the likelihood of Fed rate cuts, which will further narrow the Japan-US rate gap and put pressure on the USD/JPY pair. • Investors are cautious as potential US trade tariffs on Japan may affect economic relations, adding uncertainty to JPY’s bullish momentum. • The USD/JPY pair is capped at 154.00, and a break below 153.00 may lead to further downside, testing the 100-day SMA near 152.45. The Japanese Yen managed to remain strong against the US Dollar even as expectations for a Bank of Japan rate hike continue, found being supported by rising real wages and inflation. However, weakening US job market data fuels speculation of Federal Reserve rate cuts and tightens the Japan-US rate differential, adding further downward pressure on USD/JPY. However, it remains capped by risk-on sentiment and concerns over potential US trade tariffs on Japan. At these levels, with the pair toying with 153.00, traders are being cautious, and now market participants are looking for key US economic data – first, the ADP report followed by ISM Services PMI, to give them further direction. The Japanese Yen is still gaining on the US Dollar due to BoJ rate hike expectations and the narrowing Japan-US rate differential. However, risk-on sentiment and potential US trade tariffs on Japan limit further gains. Traders now focus on key US economic data for short-term direction. • Rising real wages and inflation in Japan strengthen the case for further monetary tightening, boosting the Japanese Yen. • Poor US job data raises the prospect of cuts in Federal Reserve rates, narrowing the Japan-US rate differential and putting pressure on the USD. • The pair is trading at the 153.00 handle, and a break below could send it to the 100-day SMA around 152.45. • Market optimism about trade negotiations between the US, Canada, and Mexico limits the safe-haven appeal of the Yen. • Investors remain cautious as Japan is likely to be a part of US tariffs, which may affect the economic relationship and market sentiment. • Traders will look for the ADP employment report and ISM Services PMI for short-term guidance in the USD/JPY pair. • On the upside, immediate resistance lies at 154.00. Further upside would face resistance at 154.75 and 155.25. The level of 153.00 acts as a strong support. The Japanese Yen (JPY) maintains its bullish stance against the US Dollar (USD), driven by growing expectations of a Bank of Japan (BoJ) rate hike. Recent data showing a rise in Japan’s real wages and accelerating inflation reinforce the case for further monetary tightening, supporting the Yen’s appreciation. To date, weakening US job market data, including this week’s dismal JOLTS report, that fuels speculation the Federal Reserve would cut rates and that the two central banks pursue different policy stances, in a way cuts the Japan-US rate differential down, making JPY more interesting and weighing upon the USD/JPY which now hovers near the major 153.00 level. USD/JPY Daily Price Chart TradingView Prepared by ELLYANA Despite the JPY’s strength, risk-on sentiment and worries over potential US trade tariffs on Japan prevent a stronger rally. Investors are careful because US President Donald Trump’s tariff policies can eventually target Japan, given the latter’s significant trade surplus with the US. Moreover, the potential trade breakthrough between the US, Canada, and Mexico has eased trade war concerns, and this has further reduced safe-haven demand for the Yen. Traders now look to additional key US data such as ADP employment and ISM Services PMI for further market directions. Technical, a break below 153.00 level would push USD/JPY closer to the area of the 100-day Simple Moving Average (SMA) at 152.45, while resistance is still the 154.00 level, with higher areas of resistance quoted at the 154.75 and 155.25. TECHNICAL ANALYSIS The USD/JPY pair continues to trade under considerable bearish pressure, trading just above the key 153.00 level. A strong breakdown below this level will lead to additional downward momentum to the 100-day Simple Moving Average near 152.45, and enhance the bearish sentiment. Daily chart oscillators are turning south but still lack overbought readings, thus allowing for some additional losses. The nearest strength will be around the psychological barrier of 154.00. Beyond this lies a pair of obstacles at 154.75 and 155.25. A continuation move above these levels could invalidate the bearish scenario and shift short-term direction toward buyers, likely targeting the 155.50-156.00 zone. FORECAST Even though there is some short-term bearish momentum, there are some very important resistance zones that can initiate a short-term rebound if violated. The major resistance level can be found around the psychological area of 154.00. A sustained move above this level could fuel a short-covering rally, driving the pair towards the 154.75-155.00 region. Further bullish momentum could drive the pair to challenge the 155.25-155.30 resistance zone, a crucial pivot point that, if decisively broken, could shift the near-term trend in favor of buyers. Beyond this level, the next upside target would be the 156.00 region, provided market sentiment supports a stronger USD recovery. Expectations of further Bank of Japan (BoJ) tightening remain

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