AUD: Australian Dollar can grow further

At the Forex currency market the Australian Dollar rate is traded slightly upward on Wednesday amid stability in the market. It is quite possible that ascending trend of the AUD will be continued today.

Forex forecast: MACD indicator is in the positive area for the pair AUD/USD and continues to go down, giving a pair sell signal, while volumes are slightly below average. Stochastic Oscillator has come out of the oversold zone, giving a pair buy signal.

Forex recommendations: in case of breakdown at the level of 1.0640 the pair will go to1.0655 and 1.0670. If an upward breakdown does not take place, the pair will consolidate at the current levels.

It became known in the middle of the week that index of wage cost  in Australia rose by 0.8% on quarterly basis (+3.8% y/y) in QI, while the forecast of growth was by 1.1% q/q,. The market had been waiting for the index, as earlier it had almost reached the significant level of 4% y/y. Now the concern of investors about the discrepancy between labor cost and index of inflation will go down.

However, today’s data may well affect the decision of the RBA in June, forcing the regulator to extend the pause in the interest rate increase.
The minutes of the Reserve Bank of Australia meeting of 3 May which was made public today stated that growing Australian Dollar has assisted to curb inflation; while interest rate remains at the previous level of 4.75% per annum. 

The RBA admits that if economic situation will develop according to expectations, interest rate increase will become flagrant necessity.
The minutes of the meeting was vague while describing the state of the labor market in the country; it is not clear yet in which way the growing wages will impact on the tightening of the labor market conditions.  At the same time sentiments of the households and labour market will be important factors for determining dynamics of inflation for the coming years.

Statistics which was made public earlier showed that trade balance in Australia rose to A$1.74 billion in March against the level of -A$0.08 billion in February. Moody's Investors Service agency gave positive assessment to the data; according to observers of the agency, resolution of the authorities to revert the balance of the state budget to the zone of surplus is well-founded and such attitude supports credit rating of the country, which is at Aaa.

Note that the rise in the indicator was caused by the growth of exports of iron ore and coal and also by the reduction of gasoline imports. Also take not that CPI level in Australia increased by 1.6% on quarterly basis (+3.3% y/y) in QI. It also became known at the beginning of the week that finance of the housing construction in Australian fell by 1.5% m/m in March. However it is just a minor factor for the exchange rate formation of the AUD. 

 

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