Weekly Analysis and Recommendation For AUD/USD:
The AUD/USD finished lower last week. The catalysts for the sell-off were weaker-than-expected economic news and the renewed possibility of an interest rate hike by the U.S. Federal Reserve later in the month.
Early in the week, the Reserve Bank of Australia left interest rates at 2.00% and issued a more upbeat statement than expected, reducing the possibility of a November rate hike that had been priced into the market ahead of the meeting.
In its statement, the RBA said, “In the face of significant structural change, the Australian economy has continued to grow at a moderate pace over the past year.” It also added, “At the same time, however, a number of indictors of economic conditions have been more positive over recent months. In particular, labor force data have shown signs of improvement and measures of business conditions in the non-mining sector are clearly above average.”
Finally, the RBA said that it “will continue to assess the outlook and adjust policy as needed.” In summary, it looks as if the RBA was happy with Australia’s economic transition, with the level of interest rates and how far the Aussie dollar has fallen.
The AUD/USD held steady after the RBA statement, but fell sharply after the Australian Bureau of Statistics said GDP expanded by 0.2 percent in the second quarter, down from a solid 0.9 percent the previous quarter. This was the slowest economic growth in two years over the second quarter due in part to a sharp fall in export volumes. This news helped drive the Australian Dollar to its lowest in over six years.
The weak GDP data was followed by a drop in retail sales for the first time in over a year, however, this was somewhat offset by trade deficit data.
The week-ended with the U.S. labor market showing some strength despite slow job growth. U.S. job growth slowed in August, but the unemployment rate dropped to a near 7 ½ year low and average hourly earnings accelerated, reviving the prospects of a Federal Reserve interest rate hike at its next Federal Open Market Committee meeting on September 17.
Besides an extended reaction to the U.S. jobs report, the AUD/USD is likely to be influenced by the September 10 employment change and employment rate reports. The employment change report is expected to show the economy added 5.2K jobs in August. The unemployment rate is expected to decline to 6.2% from 6.3%.
Because of the U.S. bank holiday on Monday, volume was light on Friday and the response to the jobs data may have been muted. With the major players returning on Tuesday, AUD/USD traders should look for increased volatility and reaction to the job report numbers since investors will have had a three-day week-end to digest the data.
Selling pressure is expected to drive the AUD/USD lower this week although technical factors may lead to periodic short-covering rallies. Volatility is expected to remain high into the Federal Open Market Committee meeting on September 17.
ForexTraq provides in-depth analysis for each currency and commodity we review in Forex Trading. Fundamental analysis is provided in three components. We provide a detailed monthly analysis and forecast at the beginning of each month for AUD/USD. Then we provide more recent analysis and information in our weekly reports.
Technical View For AUD/USD
As looking into daily chart, we certainly get that aud/usd is in down trend, close to its bottom support level and willing to make a reversal in short term. Any rise must be considered as a correction and BUY positions for middle term is not adviced. Short term traders may enter BUY positions with small stop loss ranges. Below 0.7062 levels, down trend continues and entering SELL positions is recommended.