An Aussie rating cut and its effect on the AUD

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Our friends Down Under (here and here) are increasingly talking up the possibility of a cut in both the AAA credit rating enjoyed by Australia, and the interest rate set by the Reserve Bank of Australia. Holding the AAA rating makes it part of a diminishing group of countries and, as the reports indicate, a cut, which has traditionally also meant a reduction in the value the affected country's currency, could also mean a decline the value of the Aussie dollar.

And anecdotal evidence from travelers returning from Oz indicates that the person in the street, at least, would welcome such a reduction, as the cost of living there would apparently bring tears to one's eyes.

The value of the AUD depends on other things, of course, most notably the headline interest rate, which creates a demand for the currency from the Carry Trade. However, the charts are also indicating a top against the US dollar. The pair has been flat lining for some time and has once more broken down through the 200 day Simple Moving Average.

We have set the Omicron Silver Trigger algorithmic routine to only take short trades in AUDUSD. (Click on the highlighted text to tweet it).