An extended analysis of the AUDUSD
Throughout the month of February the most traded currency pairs on our platform were the EURUSD, GBPUSD and USDJPY, as they tend to be amongst most platforms. What a lot of traders do not know is that the AUDUSD is actually the fourth most traded exchange, and is the asset with the most decisive trends over the last 12 months. Throughout the article we will look at the latest developments regarding the AUDUSD including both Technical, and Fundamental elements driving the price.
Let’s start with looking at the price movement of the asset, which tends to be the most important aspect. The Australian Dollar began to decline after reaching a price high at 0.8000, and again, when attempting to break higher than the 0.7838 resistance point. The latest movement seen on the asset this year is without-doubt bearish, but so far, this is only a correction after a long-term uptrend.
Looking at the movement this week to begin with, there are a few aspects to the price movement we can certainly notice. The price movement on Tuesday, once again turned bullish, passing the previous price wave high, but so far not able to break through the second previous high. Traders will be paying close attention to see if the price continues to appreciate past these major levels. The second point to notice regarding the exchange rate, is the Price Rejection, which was formed in the 4 hour timeframe at 12:00 last Friday. Price rejection levels are known to be strong breakout and support levels. The Price rejection was formed at 0.7621.
Now looking at what’s happening in the market, we can see plenty of activity both for the USD and AUD. Investors are focused on yesterday’s speech of the Minister of Finance, Janet Yellen. The head of the department denied fears that the bill to support the national economy of $1.9 trillion was so large that it would cause the problem of inflation; the indicators of which were too low, even before the pandemic. In turn, the Speaker of the House of Representatives, Nancy Pelosi, said that the lower house of Congress will support the package of measures proposed by the president during today’s meeting. On Wednesday, the release of core inflation data is expected, forecasted 1.4%, which is still below the 2% target announced by the US Federal Reserve System. Amid this news, the US Dollar Index reached 92.500, but then retracted back downwards. The retracement does not necessarily mean the trend has ended. All trends have retracements and pullbacks, but the price movement continues in favor of the trend after the retracement loses momentum. Again, the market will be focusing to see if the bullish movement, seen on Tuesday, will fade.
Australian Prime Minister, Scott Morrison, is actively supporting the campaign against COVID-19. He believes that the full vaccination of the population would be carried out by October this year, and his own production of the drug against coronavirus, which would be launched by the end of March, can help in this. He also said the government will spend $1.2 billion to expand the internship pay subsidy scheme as the larger worker assistance program ends. The market reacted to these statements with a slight increase in the instrument.
The Australian unemployment rate remains untraditionally high with the latest figure confirmed at 6.4% (0.2% higher than the US’s unemployment rate). The figure still remains the highest seen in over 15 years in Australia, the question is, will employment statistics continue to recover similar to the United States. Lastly, the Australian inflation figure is vital to the economy, but also to interest rates being set by the central bank. Currently, the inflation rate is close to the 1% mark, considerably lower than the Central Bank’s target of approximately 2.5%.
The Organization for Economic Co-operation and Development (OECD) improved its forecast for US economic growth for this year from 3.2% to 6.5%, and for the next one from 3.5% to 4.0%, which should be boosted by a fiscal stimulus program. The OECD also raised its forecast for Australian GDP growth for the current year from 3.2% to 4.5%.
Last note for traders, throughout the article we have looked at the latest price and market developments solely with reference to the AUDUSD. Though it is also important to analyse the two currencies individually; in other words, not as a currency pair. For example, the performance of the US Dollar against other main currencies and the same for the Australian Dollar. For the USD, we have the US Dollar index which measures the performance of the Dollar against six major currencies, making it easier for traders. However, for the AUD there is not an index available, meaning we must check individual currency pairs such as the GBPAUD and AUDJPY. The purpose of the exercise is to ensure the movement does not conflict with the general movement of each currency individually.
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Disclaimer: This material is considered a marketing communication and does not contain, and should not be construed as containing investing advice or a recommendation, or an offer of or solicitation for any transactions in financial instruments or a guarantee or a prediction of future performance. Past performance is not a guarantee of or prediction of future performance.