AUD Breakout May Signal a Rise Ahead of RBA Decision
By: Eddy Peng Jun 4, 2018
The Australian dollar edged lower, by only 0.03 percent and settling at 0.75648 against the U.S. dollar on Friday. While the intraday price for that day were down as low as $0.75137 due to greenbackâ€™s rise after the data showed U.S. job gains remained at the robust pace of growth.
U.S. economy added 223,000 jobs in May, more than forecast and bringing payroll gains for the year above 1 million, Labor Department figures showed Friday. While the jobless rate, which fell to 3.8 percent, hit the lowest since April 2000, moving further below the 4.5 percent Federal Reserve officials see as sustainable in the long run. Average hourly earnings rose a larger-than-forecasted 2.7 percent from a year earlier, helping lift the inflation rate faster.
For now, the strong labor market will keep powering economic growth, and the data reinforced expectations for Fed policy makers to raise interest rates when they meet June 12-13, which is expected to add 0.25% for both upper and lower bound.
Key events for Australia that needs to watch are RBAâ€™s rate decision due on Tuesday and Gross Domestic Product due on Wednesday. Itâ€™s widely expected that RBA will keep the interest rate unchanged at 1.50%, while GDP is forecasted to be 2.7% higher than previous figure at 2.4%. Therefore, if things match what expected, the weekly outlook for AUD will appreciate.
On a daily chart, the intraday price of AUD/USD was 0.7609 as of 2:50 p.m. in Sydney, already breaking out of a key resistance set by 23.6% Fibonacci retracement. Later, itâ€™s expected to grow further to test another resistance ahead near 0.76494, a breakout of which will expose 38.2% level.
An uptrend Demarker oscillator, which is at 0.5474 and increases at a high speed, reinforces an upward power which makes the pair rise faster. As long as it moves above 0.7 which is the overbought area, investors should be more cautious of potential downtrend risks.
Chart 1: AUDUSD Daily
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