AUD falls as probability of rate cut increases and markets dump risk assets

Daily Currency Update

AUD - Australian DollarThe Australian dollar fell through trade on Tuesday as risk off sentiment and a dovish RBA minutes prompted a correction in the recent short-term upswing. The AUD slipped below 0.67 touching intraday lows at 0.6675 as markets appetite for risk shifted following Apple’s announcement it does not expect to meet revenue targets through Q1 2020 as the coronavirus dampens demand for sales in China. Apple’s revelation highlighted broader market concerns the coronavirus will have a direct deflationary impact on global consumer demand and economic growth forecasts. As demand for risk faltered the RBA minutes confirmed the RBA’s bias to further rate cuts and concerns surrounding the broader impact of the Coronavirus. The board recognised the outbreak posed significant downside risks to outlooks for China and, as a direct result of Australia’s high-level integration into the Chinese economy, there was heightened concerns the domestic growth outlook will be forced lower. While supports remain in play on moves approaching 0.6680 our attentions now turn to todays quarterly wage price index and Thursday’s employment data. The RBA has long touted strength across the labour market as a key marker supporting neutrality in monetary policy. Softness across wage growth and a downturn in labour market performance could prompt a move below key technical supports as markets move to price in a rate adjustment. We expect resistance on moves above 0.6730 with a consolidate and extended move below 0.6680 possibly signalling a deeper downward correction.