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Market Analysis – AUDUSD

The AUDUSD pair moves within an upward corrective trend, trading at the level of 0.7755. The price movement this morning has already corrected 50% of yesterday’s bearish price movement. The price movement during this morning’s trading session has been mainly driven by the economical figures released by Australia early this morning. No further announcements are due for Australia for the rest of the day, but the US has scheduled events this afternoon which may cause volatility and price drivers.

Looking at each currency individually, we can see from the US Dollar Index the USD formed its first bullish trading day after five days of decline. The movement did in fact regain all lost ground from the previous day’s trading. This morning the index is showing a slight, and currently insignificant, decline, but traders will be monitoring to ensure momentum does not increase in the downward direction. The quoted currency is increasing in value today across the market including against its main competitors such as the Pound, Euro, Canadian Dollar, and Yen; though weak movement should be noted from previous days 

After the publication of today’s data on the Australian labor market, the positive dynamics have slowed down. Although the overall unemployment rate for April fell to 5.5% from 5.7% for March, the total number of employed people for the same period decreased by 30,600, although analysts expected an increase of 15,000. The share of the economically active population amounted to 66.0%, which is lower than the forecasted 66.3%. 

Yesterday’s Australian Q1 data on the index of changes in wages were positive. The indicator remained at the same level of 0.6% QoQ, instead of the expected decline to 0.5% and increased from 1.4% to 1.5% YoY, moving away from record lows. Nevertheless, the dynamics of the increase in wages are still insufficient to ensure the growth of inflation to the target level of 2–3% set by the Reserve Bank of Australia.

The minutes of the US Federal Reserve Open Market Committee (FOMC), published yesterday, forced investors to take more seriously the possibility of an early start to curtail the quantitative easing program, as many representatives of the regulator openly spoke about the need to increase rates. The additional pressure on the dollar is exerted by the growing yield on the securities market. Yesterday, 20-year Treasury bonds reached 2.286% during the auction.

The Federal Reserve was slightly less Dovish, but still did not necessarily change their opinion and stance, nor give any concrete confirmation. Officials of the regulator in the past have repeatedly stated earlier that the current rise in inflation is temporary and therefore, it is not time to tighten monetary policy. Also, the second key parameter is of great importance, which has also been set as a requirement for higher interest rates, is employment; the growth of which significantly lags behind the stated required level by the Central Regulator. Currently, the American economy lacks 8 million jobs, and until the situation improves, the regulator is unlikely to start thinking about raising rates. 

Yesterday, US Treasury Secretary, Janet Yellen, confirmed the intention of the US administration to raise taxes for corporations to ensure the costs of implementing the infrastructure plan and the project to support families. Moreover, she noted that a series of tax reforms that would force wealthy Americans to pay more would be carried out. This means that the planned increase in corporate tax may not be the last which has indeed worried some investors. In addition to this, analysts have also commented on the even economic recovery and the fact that a lot of job vacancies are left unfilled. According to reports it is not yet certain whether the unfilled vacancies are due to individuals not willing to take roles due to benefits, or whether employers are not confident yet in actually hiring even with required staff. 

 

 

 

 

 

 

Disclaimer: This material is considered a marketing communication and does not contain, and should not be construed as containing investing advice or a recommendation, or an offer of or solicitation for any transactions in financial instruments or a guarantee or a prediction of future performance. Past performance is not a guarantee of or prediction of future performance.
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