As expected, Australian central bank cut its cash rate by 0.25% to record low of 1.50%, in the second easing this year. In the following Rate Statement, the RBA said that the action was taken to fight low inflation, which is expected to remain case for some time and stubbornly high Australian dollar, which could complicate economic transition.
Talking about Australian economic outlook, RBA pointed on mixed labor market data, but growth continues at a moderate pace, which would be improved by easing.
Talking about global economy, RBA said that global growth remains at a pace below average, but underlying pace of growth in China, Australia’s main trading partner, appears to be moderating.
Australian dollar dipped below 0.7500 handle after RBA’s action and hit the lowest levels since July 28, but managed to recover losses on subsequent bounce.
The US dollar trades near three-week lows in early Tuesday’s trading, after weak US data undermined expectations of Fed’s early rate hike and boosted investors’ bets against the greenback.
Fresh pressure on US dollar that came after weak GDP data last Friday, was reinforced by weaker-than-expected US manufacturing data, released on Monday.
Against Euro, the dollar approaches recent low at 1.1195, while trading at session high at 102.21, just above fresh three-week low at 101.96 against Japanese yen.
Sterling remains within broader near-term directionless trading, awaiting BoE’s meeting scheduled for Thursday. Bank of England is ready to cut interest rates for the first time since 2009, in attempts to stop the country entering recession after Britain voted to leave the European Union. The central bank may also take extra measures and pump fresh money into financial system, to keep it stable, following sharp slowdown that came after BoE’s decision to keep rates on hold, just over two weeks ago.
Recent services data showed the sharpest contraction since 2009 and Monday’s manufacturing figures signalling the biggest downturn since 2013, would be among the factors that would prompt the BoE’s rate action on Thursday.
US Crude oil trades around $40, which was eventually cracked on strong bearish acceleration in the previous session. Oil price hit the lowest levels since mid-April, remaining under strong pressure on excess production and showing a loss of 20% since June.
Recent losses that took some important supports, turned technical outlook into full bearish mode, which is expected to maintain the pressure in the near-term.
Highlights of the day

Asia
Australian data were the top releases overnight. Building approval fell unexpectedly in June by 2.9%, vs forecasted 0.5% increase, but still holding above May’s 5.4% fall.
Australian trade gap widened in June to 3.2B, against expectation of gap narrowing to 2B from May’s 2.4B trade gap.

Australian central bank cut rates to record low of 1.5% from 1.75%, in attempts to fight low inflation and improve economic outlook.

Europe
UK Construction PMI for July is the highlight of European session. The figure came in focus after last month’s heavy fall from 51.2 to 46, with forecast for today going further down to 43.8. The fall in the PMI was triggered by a steep decline in residential building work while the commercial sector was also hit. The result is the worst PMI reading since June 2009 and the first time the index has fallen below 50 threshold since April 2013.

Important levels

CRUDE OIL
Hit the lowest since mid-April, on probe below psychological $40 support. Steep downtrend remains intact, with 200SMA support at $40.87 being taken out. Firm break below $40 would open next supports at $38.99 and $38.84.
Initial resistance lies at $40.87, followed by $41.29 and $41.86.

EURUSD
Extends narrow near-term consolidation below fresh high at 1.1195. Bullish technicals favor further upside, with lift above 1.1195, expected to open next targets at 1.1245/62 and 1.1295 in extension. Broken 55SMA continues to support, currently at 1.1156, guarding rising 5SMA at 1.1129 and breakpoint at 1.1074 (200SMA / converged Tenkan/Kijun-sen lines).
USDJPY
Remains within narrow consolidation above fresh low at 101.96, posted on Friday. Neutral near-term technicals suggest extended consolidation, however, overall structure remains firmly bearish.
Break below near-term base at 102 zone would open 101.74 and 101.38, the last obstacles en-route to psychological 100.00 support.
Initial resistance lies at 102.81, ahead of breakpoints at 103.72 (daily Kijun-sen) and 104.04 (daily cloud base).

AUDUSD
Bounced from session’s spike low at 0.7487, posted after RBA and hit session high at 0.7550. The downside looks protected for now, despite yesterday’s close in red, with mixed near-term technicals and overall bullishly aligned picture. Upper pivot lies at 0.7565, break of which is needed to attract levels above 0.7600 barrier (yesterday’s high lies at 0.7613).
On the downside, initial support lies at 0.7520, followed by 0.7487, loss of which would increase risk towards 0.7440/20 (former consolidation lows)., Market Analysis