Bullish Case
Set a buy stop trade at 0.7945 (cup and handle pattern top).
Add a take-profit at 0.800 (psychological level).
Set a stop loss at 0.7900 (middle Bollinger Band).
Bearish Case
Set a sell-stop at 0.7900 and a take profit at 0.7850.
Add a stop loss at 0.7945.
The AUD/USD is loitering near its highest level since February 2018 after the relatively strong wage growth data from Australia. The pair is trading at 0.7925, which is a few pips below the intraday high of 0.7945.
Australia Wage Growth
Australia is in recovery mode helped by the strong rebound of the Chinese economy and the robust commodity prices. As a result, the Australian dollar has risen by more than 30% against the greenback since March last year.
According to the country’s statistics bureau, the Wage Price Index increased by 0.6% in the fourth quarter after rising by 0.1% in Q3. This led to an annualized increase of 1.4%, higher than the median estimate of 1.1%.
The bureau attributed this to “businesses rolling back short-term wage reduction, returning wages to pre-COVID levels.” Also, the phased implementation of the Fair Work Commission annual wage review also played a role while the public sector wage freeze dragged the performance.
The AUD/USD is also reacting to the rising yields in Australia and the United States. Yesterday, the ten-year Australian government yields rose by about 7 basis points to 1.65%. This was the highest it has been since May 2019. The same trend has happened in the United States, which is a sign that investors are optimistic about the economy.
In his testimony yesterday, Jerome Powell said that this performance was mostly because investors were optimistic about the economy. He also said that the recovery was uneven, which means that the current policy will remain for a while.
AUD/USD Technical Analysis
The AUD/USD rose to an intraday high of 0.7945 and then pared back some of these gains. On the hourly chart, the price is above the ascending trendline that connects the lowest levels since January 18. The price is also between the upper and middle lines of the Bollinger Bands.
Notably, the current decline seems to be part of the handle of the cup and handle pattern. Therefore, the pair may rebound in the near term. Any move above today’s high of 0.7945 validates the C&H pattern and push the price higher.
