AUDUSD holds above GFC low

Another night of chaos in equities as the S&P 500 fell by -12%, despite the raft of aggressive easing measures announced by the Federal Reserve and other Central Banks yesterday, designed to support economies, credit and risk markets.

The overnight sell off in equities reflects the view of some that the Fed has shot all of its easing and liquidity bullets before the economy enters recession. As well as fears the introduction of more onerous guidelines and restrictions by individual countries around the Covid-19 outbreak will exacerbate the economic slowdown.

Forgetting that by bringing forward rigorous social distancing measures and lockdowns, it means countries are likely to reach peak Covid-19 cases earlier than they might otherwise and by definition a turning point sooner than later. Also, that central bank easing and liquidity measures are likely to stay in place for at least the next 12 months and that more fiscal stimulus is on its way.

Those thoughts, however, have failed to provide the beaten up AUDUSD with any respite. Apart from the obvious connection between the AUDUSD and equity markets, there was disappointment amongst participants yesterday that the RBA chose not to act in tandem with the Federal Reserve and the half dozen other banks that announced easing measures yesterday.

As traders look towards Thursday morning, when the RBA is expected to cut rates by another 25bp and announce the start of its Quantitative Easing (QE) program, the Global Financial Crisis 2008 low at .6007 is shaping as a type of “line in the sand” for the AUDUSD.

While above .6000c a recovery back towards .6600c is possible, with a move above .6330 confirmation that this rally is underway. However, should the AUDUSD break/close below .6000c, there is very little in the way of support until the low 50’s.

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