Bullish view
- Buy the AUD/USD pair and set a take-profit at 0.6700.
- Add a stop-loss at 0.6600.
- Timeline: 1-2 days.
Bearish view
- Sell the AUD/USD pair and set a take-profit at 0.6600.
- Add a stop-loss at 0.6700.
The Australian dollar wavered on Thursday morning after a series of weak economic data from the country. The AUD/USD pair was trading at the psychological point at 0.6650, where it has been stuck at in the past few days. This price is about 90 basis points below the highest point in May.
RBA rate hikes hopes fade
The AUD/USD pair has reacted to several important weak economic numbers from Australia. On Wednesday, a report by the statistics agency showed that the economic growth was slow in the first quarter.
The economy grew by 0.1% in Q1 after expanding by 0.3% in the previous quarter. This growth translated to an annual increase of 1.1%, which was lower than Q4’s expansion of 1.6%. It was also weaker than the median estimate of 1.2%.
Australia’s weakness as mostly driven by a sharp drop in capital expenditure, which sunk by 0.9%. This drop was offset by a 0.6% increase in consumer spending. These GDP figures came a day after Australia published weak company profits numbers.
Therefore, signs that the economy is slowing will likely reduce the likelihood that the Reserve Bank of Australia (RBA) will hike interest rates later this year. Minutes of the last meeting showed that officials considered hiking interest rates to battle the stubborn inflation.
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The AUD/USD pair also reacted to the weak US private payrolls data from ADP. In a report, the company said that the private sector created 152k jobs in May after adding 188k in the previous month. This increase was lower than the median estimate of 173k.
Another report showed that the non-manufacturing sector did well in April as the PMI rose from 51.3 in April to 54.8 in May. That figure was a sharp contrast to the manufacturing PMI, which moved to the contraction phase during the month.
The US will publish the latest exports and imports numbers on Thursday followed by the nonfarm payroll (NFP) figures on Friday.
AUD/USD Technical Analysis
The Australian dollar has remained in a tight range in the past few days. It was trading at 0.6650 on Thursday, a few pips below the crucial resistance point at 0.6668, its highest swing on March 8th. It is also consolidating at the 50-period and 25-period exponential moving averages (EMA).
The pair has also moved above the 23.6% Fibonacci Retracement level while the two lines of the MACD have formed a bearish crossover. Therefore, the AUD/USD pair will likely remain in this range ahead of the US NFP data. The key support and resistance levels to watch will be at 0.6600 and 0.6700, respectively.
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