AUD/USD Daily: Tested the 0.76 level for the FIFTH time in 3 months. Remains below 23% Fibonacci and Ichimoku Cloud
Fundamental Analysis
While all the noise in the market is revolving around Greece and their banks’ sudden shut down, I would like to turn my cheek from the uncertainty of the European forex dancers and focus on the Land Down Under.
Australia’s Side
On Mr. Aussie side, the good news is that the overall Australia’s jobs report seems pretty positive. Australia’s May jobs report shows that the seasonally-adjusted jobless rate was brought down from 6.1% to a one-year low of 6.0%. The individual components of the report paint an even better picture since the labor force participation rate held steady at 64.8%. Also, employment saw a 42.0K jump, with full-time jobs going up by 14.7K. Unfortunately, the previous month’s reading was revised downward from a mere 2.9k jobs lost to a painful 13.7K drop.
On the other hand, the Australian Bureau of Statistics (ABS) has suffered a budget cut and was forced to downsize its personnel, which is probably why we have been seeing a lot of revisions lately. This calls into question the reliability of data that ABS has been generating, including the recent, very optimistic jobs data. Furthermore, the Reserve Bank of Australia (RBA) admitted in its recent monetary policy statement that “slow growth in labor costs” is one of the major reasons for keeping rates at record-low levels.
Looking into the future, consumer spending and sentiment are starting to deteriorate, so perhaps Q2 wage growth won’t be very promising either. As long as wage growth remains subdued, we’ll probably see rates at record-low levels and weaker demand for Mr. Aussie, which could push him to break below the very resilient support level of 0.76 against Ms. USA on the forex dance floor.
China’s Side
Other than the economics of the Land Down Under, Mr. Aussie’s trading buddy, China’s economy and their surprise acts could effect his dance moves on the forex dance floor. The People’s Bank of China (PBoC) announced that they’d be pumping up liquidity to the tune of 35 billion yuan in order to “stabilize market expectations.” Before financial market participants could even digest what this statement meant, the PBoC followed it up with a 0.25% benchmark interest rate cut, a 0.25% deposit rate cut, and a reduction of 50 basis points on the reserve ratio requirement (RRR).
While the long-term chart of the Shanghai Composite Index indicates that their economy isn’t doing all that bad, analysts say that this surprise move actually caused investors to panic, triggering a 20% decline in the Chinese equity market in the days that followed.
This doesn’t really mean much for the Chinese yuan’s forex levels since the PBoC sets a trading range for its currency, but increased stimulus in China could have a more pronounced impact on the commodity currencies (i.e. Mr. Aussie and Mr. Kiwi) if the rise in lending and spending in the world’s second largest economy translates to higher demand for raw materials.
US Side
A Fed rate hike and continued low oil prices could make Ms. USA stronger which will ultimately push Mr. Aussie lower in his AUD/USD forex moves.
Technical Analysis
The Australian dollar dancing against US dollar (AUD/USD) bounced back up above 0.76 for the fifth time since March 2015, making this level an extremely important boundary for FX traders. The pair opened lower on Monday’s Sydney session but moved back up as the day moved on to the European session but remains below the Ichimoku cloud. The RSI is heading straight below the neutrality area.
Market Sentiment: Range
Forex Trading idea: Continue to trade the range between 0.78 and 0.76 until we see a concrete break below the super duper 0.76 support.
If the pair confirms above the Ichimoku cloud we could see more rallies back towards the 23% Fibonacci at 0.7971
Where to set your stops and limits:
| Support Levels | Turning Point | Resistance Levels |
|---|---|---|
| 0.76 | 0.78 | 0.8070 |
| 0.75 | 0.7971 | 0.8235 |
*Important Note: The support and resistance levels are not suitable for all traders and largely depend on your account size, margin and leverage. Book a private lesson to learn how to personalize your account based on our trading guide.
#1 Best Selling Author. Helping you accelerate your retirement with Triple Compounding™ Former engineer on a mission to help 1 million households take control of their finances. Founder & CEO of Invest Diva.
