AUD: Activity in Australian Dollar is still low

At the Forex currency market the Australian Dollar rate started to decline in the middle of the week, however activity in the pair has been low due to the wait-and- see attitude of investors, who are focused on the developments which will take place at the end of the week. 

Forex forecast: MACD indicator remains in the negative area for the pair AUD/USD, and started to make upward reversal, giving a buy signal. Stochastic Oscillator also reverses upward in the neutral zone; however its buy signal is weak at the moment.

Forex recommendations: in case of breakdown at the level of 1.0480, the pair will go to 1.0490 and 1.0510. If upward breakdown does not take place, the pair will stay close to the current levels.

It became known today that price index for corporate services in Australia remains unchanged on monthly basis, -0.5% y/y in July against the level of -0.8% y/y in June. In addition, index of leading indicators Conference Board in Australia fell to -0.8% in June; while a month earlier it had amounted to -0.1%.

According to the data released last week index of leading indicators Westpac in Australia increased by 0.2% m/m (+1.6% y/y) in June against the growth of 3.0% y/y in May. However, the rate of decline in the index is minimal, considering that the index has been steadily decreasing since 2010. This index indicates prospects for economic activity for the next 3-9 months and judging by its dynamics, rapid growth can be hardly expected.

Minutes of the last meeting of the Reserve Bank of Australia which were made public earlier showed that leading economic indicators demonstrated moderate increase in employment, and if the world financial turmoil would continue, it could become a factor of pressure to household spending and sentiments in the business circles, which in its turn, would have a negative impact on the general projections of the Central Bank. At the same time expensive raw material in the world pushes the level of inflation upward. In addition, the document says that high exchange rate of the AUD and low level of households demand, have a restrictive effect on inflation. Among other things at the last meeting, arguments in favour of the rate increase were suppressed by the downside risks to demand and high level of tension at the global financial sector.

We would remind that according to the decision of the Reserve Bank of Australia interest rate in the country was left at the previous level of 4.75% per annum. In the follow-up comments, the head of the RBA, Mr. Stevens said that external uncertainty prevents the rise in the interest rate in Australia at the moment. He said that “it was agreed that it was reasonable to maintain current course of monetary policy especially taking into account acute sense of uncertainty at the financial markets recently. At the next meeting the RBA will continue to estimate varying prospects for growth and inflation”.

Despite informative internal background, external environment is determinative for the AUD.

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