AUD: Australian Dollar tends to strengthen further

At the Forex currency market the Australian Dollar rate grows on Monday, continuing to move in the ascending channel.

Forex forecast: MACD indicator is in the positive area for the pair AUD/USD, moving away from the signal line, and giving a shape to a buy signal. Stochastic Oscillator is going upward in the neutral zone, giving a buy signal.

Forex recommendations: in case of breakdown at the level of 1.0740, the pair will go to 1.0760 and 1.0790. If upward breakdown does not take place, the pair will consolidate at the current levels.

It was announced today that 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.

The meeting of the RBA will be held on Tuesday and it is possible that regulator will give markets to understand that it feels quite comfortable in the current environment at the current levels of rate.

The minutes of the Reserve Bank of Australia meeting of 3 May which were made public earlier 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 a necessity.

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. However, decrease in the local economy was not as much as expected, although aftermath of the flooding had a severe impact on exports (the fall of 8.7% in QI which equals to -2.1% of GDP). Despite such state of economy, the market is convinced that the RBA will make the first step towards monetary policy tightening in August this year, interrupting the pause of the previous five meetings. Economists anticipate that second half of the year will be more successful: intake of business investments gives cause to such forecast.

It became known last week that index of business activity in the Australian service sector (PSI) declined to 49.9 points in May. Therefore, it fell below the key level of 50 points. In April the indicator grew to 51.5 points.

 

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