AUD: Australian Dollar inclines towards correction after sales

At the Forex currency market the Australian Dollar rate demonstrates attempts to regain on Monday after massive sales last Friday.

Forex forecast: MACD indicator is in the positive area for the pair AUD/USD, and is going down, giving a pair sell signal. Stochastic Oscillator declines in the neutral zone, giving a sell signal and approaching oversold zone.

Forex recommendations: in case of breakdown at the level of 1.0530, the pair will go to 1.0515 and 1.0480. If downward breakdown does not take place, the pair will consolidate at the current levels.

Last week, the Reserve Bank of Australia left interest rate at the previous level of 4.75% per annum and stressed that current course of policy is quite acceptable, which triggered sales of the AUD because it might mean that monetary policy tightening will continue to be suspended in the next few months.

As it was announced earlier inflation in Australia increased by 0.2% m/m (+3.3% y/y), as per TD Securities estimates. It is the weighted average inflation index which is a guideline in decision making for the Bank of Australia, and it is slowing down its growth rate now (in April: +0.3% m/m), indicating that prospects of the increase in the interest rate in the coming months are slipping away.

According to the data released earlier, mortgage lending in Australia increased by 4.8% m/m in April. Meanwhile, revised data on mortgage lending for March amounted -1.1% (-1.5% m/m previously). Therefore, Australian economy continues to recover from the flooding in January. Another reason that helps improvement in the mortgage sector is market’s belief that the RBA will keep interest rate unchanged for a long time.

Earlier representatives of the Ministry of Finance in Australia said that level of GDP is not the way to determine further movement of economy, although the Ministry still expects further improvement in the country’s economic growth. We would remind that GDP in Australia fell by 1.2% on quarterly basis (+1.0% y/y) in QI, which is the maximum fall in 20 years.

The data released last Thursday showed that Australian economy created fewer jobs than expected; employment rate in Australia increased by 7.8 thousand in May against the forecast of growth by 25 thousand.

Unemployment rate remained at the level of 4.9%, the same as in April.

Investors were frustrated with this data, since it indicates slowdown in the recovery rate of the local economy, caused in particular by the flooding in January.

If previous sale of the AUD was provoked by weak data on Chinese exports, which upset investors; sales on Friday were clearly triggered by risk aversion.