FXStreet (Bali) – A fresh bout of risk-aversion selling has taken the Yen and US Dollar even higher, the former being the main beneficiary. AUD/USD has sunk below a critical support level at 0.7590, hitting its lowest since April 15 at 0.7586.
China cut rates yet again
Since the market focus has been completely shifted to Greece, news of the People’s Bank of China lowering, yet again, its interest rates in response to slower growth, is being shrugged off. Although as the economic conditions stand in China, the persistent reduction of rates in China, rather than being a positive input for the Aussie, is starting to be interpreted as a negative development.
The PBOC cuts its 1 year benchmark lending rate by 25 bps to 4.85%, with the 1 year benchmark deposit rate cut by 25 bps to 2.0%. Reserve requirement ratio (RRR) for banks lending to farm sector and SMEs WAS lowered by 50 bps.
PBOC said: “The interest rate and RRR cuts, will help stabilise growth, adjust structures and lower social financing costs”, the central bank said. Going forward, the central bank will continue to implement prudent monetary policy, use various policy tools to strengthen and improve marco-prudential management, optimise policy combinations and create neutral and appropriate monetary and financial environments for economic adjustments and upgrading.”
AUD/USD technicals: Downward continuation anticipated
Valeria Bednarik, Chief Analyst at FXStreet, notes: “Chinese stimulus tends to boost Aussie demand, whilst dollar demand on Grexit fears weighs on the antipodean currency. Technically, the 4 hours chart presents a strong bearish tone, with the price getting near the 0.7600 figure and the technical indicators heading sharply lower in negative territory. Should the price extend below 0.7590, chances are of a downward continuation towards 0.7532, this year low posted last April.”
(Market News Provided by FXstreet)