G’day Invest Diva Mates! Today we are taking a look at the Land Down Under as Mr. Aussie may just have changed directions on the forex dance floor. So gear up as I conduct a full on Diamond Analysis on him to figure out which currency is his best forex match in the coming months.
Economic Points
More Employment in the Land Down Under
Australia printed a stronger than expected employment report, indicating that the economy added 17.4K jobs in August versus the expected 5.2K gain. Now THIS is what I’d call positive reading! The data was enough to bring the jobless rate down from 6.3% to 6.2%, even as the participation rate improved from 64.9% to 65% in the same month. Despite initial down moves, Mr. Aussie managed to climb up a resistance level on the news throughout the trading day, well into the London session.
Inflation Expectations are Down
Melbourne Institute (MI) released a lower number than last month for an index which shows the percentage that consumers expect the price of goods and services to change during the next 12 months. While it is not as important a number as jobs data, expectations of future inflation can manifest into real inflation, primarily because workers tend to push for higher wages when they believe prices will rise, and that is the reason why Aussie investors care about it.
This could be a reason why Mr. Aussie didn’t immediately jump up on the jobless reports.
Chinese CPI climbed from 1.6% to 2.0% in Aug
Another factor that weighs on Mr. Aussie is Chinese economy, as they are best buds when it comes to international trading. Consumer Price Index (CPI) accounts for a majority of overall inflation. Inflation is important to currency valuation because rising prices lead the central bank to respond by raising interest rates, leading to more strength in Chinese Yuan. This could be a beginning of recovery for China after they shocked the world with their currency devaluation in August, leading to massive declines in Mr. Aussie.
Should there be more positive news out of data, we could expect Mr. Aussie to potentially change directions to the upside in the near future.
US Unemployment Claims Drop
Slow and steady wins the race, eh? Well Ms. USA heard yet another positive news with the jobless claims dropping to 275K from last week’s 281K and better than the expected 279K. But it seems Ms. USA didn’t have a chance to get too excited about the news as many forex traders are impatiently awaiting Friday’s PPI and Prelim UoM Consumer Sentiment releases.
Fundamental Summary
With both Mr. Aussie and Ms. USA hearing positive news, it is going to be difficult for either one to knock the other down in the forex dance competition. We would normally want to pair a strong currency versus a weaker currency for stronger trends. So maybe for the time being, Aussie fans should pair him up with weaker currencies such as Mr. KIWI? The AUD/NZD pair skyrocketed today on worse than expected Kiwi data bundled with positive Aussie news.
Technical Analysis
AUD/USD
The pair could be in the process of a trend change as it reached our bearish target and a key support level of 0.69. For now, it could be a matter of which currency will get more positive economic news: the US dollar or Mr. Aussie. A break above 0.76 could be the confirmation of the trend change that we are looking for in a long run.
AUD/NZD
Remaining below the Ichimoku cloud on the monthly chart, this commodity pair had a massive breakthrough on the daily time frame today which could bring it out of consolidation. The pair seems to have reached a bottom at 1.02 and recently broke about the 23% Fibonacci level, currently testing the 38% level at 1.1450. A break above this could open doors for more upside with targets set at 118.50 and 1.2250 in extension.
Supports and resistance levels
| Support Levels | Turning Point | Resistance Levels |
|---|---|---|
| 1.0970 | 1.1450 | 1.1850 |
| 1.050 | 1.0970 | 1. 2250 |
*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.
