By Jameel Ahmad, Chief Market Analyst at FXTM
The AUDUSD continued its recent advancement in response to the RBA leaving interest rates unchanged, while the pair also benefited from the announcement that China’s manufacturing PMIs were confirmed at a 6-month high. The RBA interest rate decision was also absent from a dovish post rate statement suggesting that the Australian currency was overvalued, which might be expressed during an upcoming RBA minutes release.
All in all, the absence of a dovish RBA statement alongside the positive China data has led to the AUDUSD surpassing the 0.9463 psychological resistance level on my daily timeframe. The pair is now looking to surpass the 0.9474 resistance level, and the next 48 hours are likely pivotal towards whether the pair can surpass this resistance, or encounter a pullback.
On Thursday morning, the latest building approvals and retail sales figures are released from Australia. The Australian economy is under pressure to refrain from relying on their mining and export industries, and were recently criticized for these sectors contributing towards 0.9% of their recent 1.1% quarterly GDP growth. Economists would prefer for the Australian economy to become more reliant on domestic consumption, including both building approvals and retail sales. Currently, building approvals are expected to increase by 3.5%, with Retail Sales expected to advance by 0.3%.
This Thursday, the latest US non-farm payroll is also scheduled to be released. It is possible that a major contributing factor behind the AUDUSD’s recent bullish momentum is because confidence has decreased in the US economy. During the FOMC meeting two weeks ago, the Federal Reserve downgraded their 2014 economic growth projections. Additionally, Janet Yellen refrained from offering a specific timetable for a US interest rate hike. Since then, we have received confirmation that during the 1st quarter of 2014, the US economy contracted by an annualised 2.9%.
The alarming GDP confirmation has added increased pressure for Thursday’s non-farm payroll to impress. The US employment sector has made substantial progress as of late. For example, the US economy has now recovered all of the 8.7 million jobs they lost during the recession. Also, the US has added over 200,000 jobs to their economy for the past four consecutive months (something that hasn’t been achieved since 2000). However, the response to the US economy adding 217,000 jobs last month was muted. With Janet Yellen refraining from offering an indication for the Federal Reserve to raise interest rates, I am weary that unless we see an NFP figure above 220,000 this month, the response on the markets will be muted once again.
In regards to the technicals on the Daily timeframe, the AUDUSD has recently surpassed the 0.9463 resistance level and is now challenging a November 2013 high at 0.9475. If the pair continues to advance, further resistance is situated at 0.9520.
However, both the Stochastic Oscillator and RSI are suggesting that the pair is close to reaching the overbought boundaries. If the Australian economic data disappoints, or the US NFP impresses, an AUDUSD pullback is likely. In which case, the AUDUSD could possibly use previous resistance levels as support. Possible levels are situated at 0.9425 and 0.9360.
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