Aussie dollar edged lower on the third week of April, almost erasing last week’s gains in just two days. Since the end of March it has been experiencing three week’s sharp drop to three-month lows as U.S. Federal Reserve announced the 25 basis point of rate hike to manage potential financial risks. Back to the recent performance at the end of the third week, Aussie ceases to decline further and rallies slightly close to the 5-day moving average found at 0.75382 on April 21.
The minutes of the Monetary Policy meeting of the Australian Reserve Bank Board on April 4 decided to leave the cash rate unchanged at 1.5 per cent. Annual employment growth jumped to 1.2 percent, although the unemployment rate remained at 5.9 percent which is still higher than the rate to be at full employment. Even though this encouraging outcome partly confirms the signals from the forecasting indicators, the board has been still concerned the prevailing soft conditions in the labour market. Additionally, angst over the household consumption, revealed by weak employment growth, should not be neglected as it has been a little weaker than expected.
On April 21 the Commonwealth Bank (CBA) decided to raise the lending rates, maximum to 0.5 percent. This decision increases banks’ profits and may be a forward-looking signal for the rate hike in the future, fuelling the potential appreciation of AUD.
Since Australia’s economy is closely related to China, the better-than-expected GDP of the first quarter in China (6.9%) reinforced prospects of the economic development in Australia, beating the forecast of 6.8 percent.
Regarding U.S. economy, Secretary of the Treasury Mnuchin’s comments eased growing concern over President Trump’s foundering fiscal agenda, saying that the tax reform is almost ready after failure of repealing Obama-care. The optimism spread for a U.S. tax overhaul possibly push the U.S. dollar near term.
The dollar index eased to drop further recently on April 21 near the MA (5). Two key resistances can be found at MA (60) of 100.539, and the upper trendline in blue. If it can break MA (60) or MA(200), it may move further to fluctuate at the range of two trendline in blue.
Chart 1: USD Index Daily
Looking at the daily technical movement of AUD against USD, we don’t see much evidence to support its growth over the short term. Although it rallies back to MA (5), the RSI (14) at 45.2492 shows the relatively weak performance currently. By analysing with Fibonacci retracement, 0.76107 has provided resistance with 76.4 percent possibility of decline near term, while before that the MA (20) would be the first resistance that AUD faces.
Chart 2: AUDUSD Daily
In the long term, it’s fluctuating between the weekly channel, with supporting at 0.71448 and resisting at 0.78340. Since the uncertainty over results of Trump’s economic agenda and the potential rate hike in Australia, Aussie tends to breakout upwards.
Chart 3: AUDUSD Weekly
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