AUD/USD made a sharp fall after the Chinese central bank announced a rate hike. The news from China had a stronger impact than positive Australian news released earlier. It’s now supported in lower levels. Update.
The People’s Bank of China raised the rates by 0.25%. This move was expected, but the timing is never expected in China. A higher interest rate in China means less growth. Less Chinese growth means less imports of Australian commodities.
After the US dollar was badly hurt in recent weeks, it was time to rise – less Chinese growth also triggered risk aversive trading on global fears, pushing money into the “safe haven” dollar and yen.
These factors played against the Aussie – it fell from around 0.99 to around 0.9650. It now bounced back above 0.97. This line, 0.9650, served as a resistance line when the Aussie was climbing higher, and now worked as strong support, after other lines collapsed.
The lines above are 0.9750, 0.98 and 0.9850. Below, more support is found at 0.9465 and 0.9366.
This terrible drop in the Aussie came despite good news from Australia – the meeting minutes showed that the RBA is ready to raise the rates once again, after a long period of pauses. The Australian economy is doing really great. Also the sales of new vehicles posted a nice rise of 0.9%, better than last month.
But without Chinese strength, the Australian strength is endangered. Currently China is also doing well, and the sell off is based on fear as well as profit taking on the dollar fall.
Will the Aussie continue falling? Is it just a temporary retracement? We’ll get answers quite soon.
Want to see what other traders are doing in real accounts? Check out Currensee. It’s free..