AUD May Fail to Rebound Given Unchanged Monetary Policy
By: Eddy Peng May 17, 2018
Aussie dollar set to advance Wednesday, nearly erasing losses on the previous day despite the U.S. dollar had a slight gain, showing a strong strength in the Australian dollar. Before AUD/USD got to where it is now, the pair has essentially been in a downtrend since late January. Since then, a falling price channel has formed, the lower line of which was broken through on late April. The pair went down further from then onwards to the current position.
Keep an eye on April’s local jobs report during Thursday’s Asia trading session. The Unemployment Rate is expected to keep at 5.5 percent, with employment change’s forecast in 20,000 which is much higher than the previous. However, follow through potential could be lacking if the data does not significantly alter RBA monetary policy expectations. This could be the case given that the central bank has reiterated earlier this week that they don’t see a strong case for a near-term policy adjustment from their meeting minutes.
If we look at the daily chart of U.S. Dollar Index first, it’s trying to break out of the key resistance given by last week’s high around 93.23. If it succeeds to edge higher, the next target is Dec. 12’s high around 94.21, also fuelling the downtrend power for AUD/USD for the next couple of days.
Chart 1: USD Index Daily
However, if U.S. Dollar Index retreats ahead of the resistance, AUD/USD may extend recent gains to break out the lower line of the price channel. All in all, the pair is right at the position that investors should give it more patient. But coupled with expected unchanged monetary policy in Australia, Aussie dollar is more likely to pull back again.
Chart 2: AUDUSD Daily
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