Bullish View
- Buy the AUD/USD pair and set a take-profit at 0.7350.
- Add a stop-loss at 0.7180.
- Timeline: 1 day.
Bearish View
- Set a sell-stop at 0.7210 and a take-profit at 0.7150.
- Add a stop-loss at 0.7300.
The AUD/USD pair held steady during the American and Asian sessions as worries on Europe remained and as investors reacted to the latest Australian wage growth data. It is trading at 0.7247, which is a few points below this week’s high of 0.7285.
Australia Wage Growth
Wages have become a key part of the Reserve Bank of Australia’s (RBA) monetary policy. In past statements, the bank has repeatedly said that wage growth will help to determine how fast the bank will hike interest rates.
Data published by the Australian Bureau of Statistics (ABS) showed that the country’s wage price index (WPI) rose from 0.6% in the third-quarter to 0.7% in Q4. On a year-on-year basis, wages jumped from 2.2% to 2.3%, which was slightly below the estimated 2.4%.
These numbers show that the Australian labor market is moving back to where it was before the pandemic started in 2020. Last week, data by the agency showed that the unemployment rate declined to 4.2% while the country added over 12k jobs.
Therefore, considering that other economic numbers have been strong, there is a possibility that the RBA will start moving in the coming months. Most analysts have put a timeline of the first hike coming in May. Just on Wednesday, the Reserve Bank of New Zealand decided to deliver its third interest rate hike.
The AUD/USD pair is also reacting to the rising tensions in Ukraine. In a statement on Wednesday, Australia’s Prime Minister warned that Putin was keen to expand his attack throughout Ukraine.
Later today, the key data to watch will be the second estimate of the US Q4 GDP numbers. Based on the first estimate, analysts expect that the data will show that the US economy expanded by 6.9% in Q4. The US will also publish the latest new home sales and initial jobless claims data.
AUD/USD Forecast
The four-hour chart shows that the AUD/USD pair made a bullish breakout after the latest Australian wage growth numbers. It rose to the highest level since January 13th. As that happened, the pair managed to move above the descending trendline that formed the shoulder of the inverted H&S pattern.
It has also risen above the 25-day and 50-day moving averages. Therefore, the pair will likely keep rising as bulls target the next key resistance level at 0.7350.
