AUD/USD: New Trading Month Is In Positive Territory
Yuri Papshev | Nov 01, 2016 06:04AM ET
Trading recommendations
Sell in the market. Stop-Loss 0.7690. Take-Profit 0.7630, 0.7600, 0.7520, 0.7500, 0.7445
Buy Stop 0.7730. Stop-Loss 0.7680. Take-Profit 0.7800, 0.7820, 0.7900, 0.7960
Overview and Dynamics
As expected by most economists, the RBA left interest rates today in Australia unchanged at 1.5%. In a statement, the RBA stated that,
taking into account available information and, after easing monetary policy at meetings in May and August, the bank's board considered that the preservation of the old policy at this meeting would correspond to the sustainable economic growth and achievements since the inflation target.
Previously RBA Governor Lowe said the central bank may allow inflation to remain below target for a longer time range. Despite the fact that in the 3rd quarter inflation was stronger than expected, the RBA expects that it will remain low, and its acceleration in the near future is unlikely.
Consumer prices increased in Q3 by 0.7% (with growth forecast at 0.5%), annual inflation accelerated to 1.3%, but has not yet reached the central bank's target range of 2% -3%. At the same time, concerns about inflation and the weakness of conflicting data on the labor market are offset by the risk of overheating of the property market. Housing prices, especially in the major cities of Australia, are growing steadily.
The RBA Australian dollar sharply strengthened today in the foreign exchange market. This also contributes to rising commodity prices. So, today published the price index for raw materials RBA, which is considered a leading indicator of changes in the export prices, showed a 16% growth in October (in annual terms).
Price changes directly affect the GDP of Australia and the Australian dollar exchange rate, which remains the commodity currency. Australia's economy is export-oriented, and commodities such as liquified natural gas, coal, iron ore are Australia's major export commodities.
Data from the US will be released today. Between 14:00 - 15:00 (GMT) will be published on the block US major macroeconomic indicators for October (the index of gradual acceleration of inflation from the ISM (estimate 54), and the index of business activity in the manufacturing sector ISM (forecast 51.5)).
If data will be weaker than forecasted, it will give an additional impetus to the pair AUD/USD, the strengthened today by 0.6%, or by nearly 50 points after RBA rate decision. However, if US data comes out stronger, the US dollar will quickly regain lost ground.
Technical analysis
The AUD/USD is launching a new trading month in positive territory. On the weekly chart, the pair is growing in the uplink to the upper boundary, passing near the level of 0.7960 (EMA144 on the weekly chart). The pair rebounded today from the support level 0.7610 (EMA50 daily chart, EMA200 the 4-hourly chart) and continues to grow to the nearest resistance level 0.7700. In case this level is broken, the immediate goal will be the level 0.7750 (the upper boundary of the rising channel on the daily chart).
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Indicators OsMA and Stochastic on the 4-hour, daily, monthly charts deployed on long positions. The pair AUD/USD remains above the key support level of 0.7520 (EMA200 and the lower line of the rising channel on the daily chart).
Positive macro-economic indicators coming out of Australia in recent years, support the Australian currency. The Australian dollar also remains one of the most stable currencies in view of the interest of its purchases on the part of investors that put its growth strategy based on trade «carry-trade» (interest rate in Australia 1.5% is among the highest in the world among countries with developed economies).
In the event of breakdown and consolidation above the 0.7750 there is high probability of further growth of the pair to 0.7820 levels (Fibonacci level of 38.2% and April's highs), 0.7960 (EMA144 on the weekly chart), 0.8130 (50.0% Fibonacci level), 0.8200 (EMA200 weekly chart).
In the case of the alternative scenario to reduce the pair broke the support level of 0.7610 could trigger a further decline in the pair AUD/USD to the 0.7520 level, and the breakdown of the support level 0.7445 (23.6% Fibonacci level of the correction to the wave of decrease in pair from July 2014) may expand upward trend pair AUD/USD and direct it toward support levels 0.7325, 0.7140 (May lows).
Determining levels are 0.7520, 0.7750.
Support levels: 0.7610, 0.7520, 0.7445, 0.7325, 0.7290, 0.7200, 0.7140 Resistance levels: 0.7700, 0.7820, 0.7900, 0.7960
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