The Australian dollar lost ground after the Chinese central bank decided to lift the reserve requirement from banks by 50 basis points – 0.50%. AUD/USD enjoyed Chinese growth and is now suffering from tightening steps in the world’s second largest economy.
For many days now, there were talks about a Chinese rate hike. The last time that this happened, the Aussie fell, but wasn’t alone – the dollar strengthened against many currencies. We didn’t get a hike in the interest rate but rather a hike in the reserve ratio.
Gerry Davies reported that the initial news flash was of a 0.50% interest rate hike, which was significantly more than expected. The Aussie crashed by 80 pips instantly but immediately recovered after this was corrected to a move only in the reserve ratio.
AUD/USD traded under the 0.9915 resistance line, and enjoyed global risk appetite trading, as the Irish crisis is nearing a resolution. Other currencies such as the Euro are on the rise. But the Aussie’s party stopped with the news, and the pair is now struggling to hold on to the 0.9863 support line it recently reconquered.
Levels above are 0.9915 and parity. Levels below are 0.9750 and 0.9660. Here is more AUD/USD technical analysis.
A close of the week under 0.9863 will be a bearish sign, while a close above this line will give hope for recovery.
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