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AUD/USD drops on ZIRP talk

AUD/USD – Daily Candlesticks
Source: GKFX / MT4 (October 20, 2020)

AUD/USD has dropped from a falling trendline through the most recent highs and below the Oct. 6 low – increasing the scope for a possible breakdown below the key 0.70 round number level.
 

TAKEAWAYS


•    Stock markets turn lower as Pelosi deadline for stimulus nears
•    Aussie dollar drops after RBA discussed cutting rates to zero (ZIRP)
•    PBOC leaves benchmark interest rate (LPR) unchanged
•    Bitcoin gains amid talk of central bank digital currencies
•    DAY AHEAD: China rate decision, Netflix & Snap Q3 earnings

 

GURU WISDOM


To be a successful business owner and investor, you have to be emotionally neutral to winning and losing. Winning and losing are just part of the game. – Robert Kiyosaki

MARKETS


The Australian dollar struck a 3-week low against the dollar (AUD/USD) countering a day of broader losses in the greenback. RBA minutes revealed the central bank had discussed cutting rates to zero and a formal quantitative easing program. The Chinese yuan weakened a touch after the People’s Bank of China left the loan-prime rate unchanged at its meeting on Tuesday.


Volatility continues to pickup across markets heading into the November 3rd election. Global stocks turned lower again on Monday as investors fretted about the approaching deadline for reaching a US stimulus deal proposed by House Speaker Pelosi. 


Wall Street reversed early gains to turn lower with the major indices losing over 1%. European stocks closed in the red but remained up from last Thursday’s lows while Asian markets dipped early on Tuesday.


The price of oil declined for a fourth day over global growth concerns amid failed stimulus talks and rising virus cases in Europe but the fall has been limited. Gold and silver prices were slightly higher.
 

RBA & ZIRP


The RBA could begin a QE program of A$ 100 billion per month according to analysts at ANZ Bank. That’s a step up from its current yield curve control whereby the bank will buy government bonds as necessary to keep yields on 3-year bonds steady. The central bankers also discussed the idea of cutting rates to zero – a policy known as ZIRP in order to protect the Australian economy from damage done by new lockdown measures to counter rising cases. 
 

Netflix Q3 earnings


Netflix has been one of the more popular stocks in the aftermath of the pandemic but subscriber growth likely slowed down in the third quarter after blockbuster gains in Q1 and Q2 while countries were in lockdown. The company expects 2.5 ‘net adds’ in subscribers from July through September– down from the 10 million in the prior quarter. The subscriber growth figure tends to determine the reaction to earnings in the stock more so than profits and sales.

 

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