Australian Dollar: USD/AUD (AUD=X) Rises as Fed’s Dovish Signals Continue
Another month of sharp decline in Australian investment lending was not enough to prevent the Australian Dollar to US Dollar (AUD/USD) exchange rate recovering ground this morning.
Even though lending saw a -1.7% contraction in May, defying forecasts of modest 0.5% growth, the Australian Dollar (AUD) remained on a positive footing against its rivals.
As the accompanying home loans figure bettered expectations, showing only a slim -0.1% contraction on the month, this gave investors some cause for confidence.
With market risk appetite generally elevated in the wake of the latest set of Federal Open Market Committee (FOMC) meeting minutes, given the increasingly dovish tone of policymakers, the mood of AUD exchange rates improved.
Fresh Signs of Fed Dovishness Weigh Heavily on US Dollar (USD) Exchange Rates
The US Dollar (USD) fell further out of favour with investors as a result of the dovish meeting minutes, with a July interest rate appearing an increasingly certain prospect.
Commentary from Fed Chair Jerome Powell also weighed heavily on USD exchange rates, as Aila Mihr, senior analyst at Danske Bank, noted:
‘The testimony from Fed Chairman Powell all but confirmed that the next move from the Fed is an easing of monetary policy. During his hearing, Powell stressed that uncertainty since the June meeting continued to dim the outlook for the US economy and that trade war risks overshadow the healthy labour market.
‘On the back of the dovish language, markets started to reprice the probability of a 50bp cut at the end of the month (now back up at 25%).’
With markets pricing in the prospect of an imminent rate cut the US Dollar was left to trend lower across the board today.
Signs of Weakening US Inflation to Dent US Dollar (USD) Appeal Further
The AUD/USD exchange rate could gain further ground this afternoon if June’s US consumer price index data disappoints.
Forecasts point towards the headline inflation rate easing from 1.8% to 1.6% on the year, with price pressures also expected to stagnate on the month.
While the consumer price index is not the Fed’s preferred measure of inflation any weakness here would still add to the case for policymakers to cut interest rates sooner and more sharply.
On the other hand, signs of resilience within the inflation data could offer the US Dollar a rallying point, even as worries over the wider economic outlook remain.
Overall, the bias in prices is: Sideways.
The projected upper bound is: 0.71.
The projected lower bound is: 0.69.
The projected closing price is: 0.70.
A white body occurred (because prices closed higher than they opened).
During the past 10 bars, there have been 5 white candles and 5 black candles. During the past 50 bars, there have been 24 white candles and 25 black candles for a net of 1 black candles.
Momentum is a general term used to describe the speed at which prices move over a given time period. Generally, changes in momentum tend to lead to changes in prices. This expert shows the current values of four popular momentum indicators.
One method of interpreting the Stochastic Oscillator is looking for overbought areas (above 80) and oversold areas (below 20). The Stochastic Oscillator is 33.0789. This is not an overbought or oversold reading. The last signal was a buy 1 period(s) ago.
Relative Strength Index (RSI)
The RSI shows overbought (above 70) and oversold (below 30) areas. The current value of the RSI is 52.22. This is not a topping or bottoming area. A buy or sell signal is generated when the RSI moves out of an overbought/oversold area. The last signal was a buy 38 period(s) ago.
Commodity Channel Index (CCI)
The CCI shows overbought (above 100) and oversold (below -100) areas. The current value of the CCI is -26. This is not a topping or bottoming area. The last signal was a sell 4 period(s) ago.
The Moving Average Convergence/Divergence indicator (MACD) gives signals when it crosses its 9 period signal line. The last signal was a sell 2 period(s) ago.
Rex Takasugi – TD Profile
FOREX AUD= closed up 0.002 at 0.698. Volume was 38% below average (neutral) and Bollinger Bands were 16% wider than normal.
Open High Low Close Volume___
0.696 0.699 0.695 0.698 55,004
Short Term: Neutral
Intermediate Term: Bullish
Long Term: Bearish
Moving Averages: 10-period 50-period 200-period
Close: 0.70 0.69 0.71
Volatility: 9 7 9
Volume: 67,987 84,621 101,764
Short-term traders should pay closer attention to buy/sell arrows while intermediate/long-term traders should place greater emphasis on the Bullish or Bearish trend reflected in the lower ribbon.
FOREX AUD= is currently 1.6% below its 200-period moving average and is in an upward trend. Volatility is high as compared to the average volatility over the last 10 periods. Our volume indicators reflect moderate flows of volume into AUD= (mildly bullish). Our trend forecasting oscillators are currently bullish on AUD= and have had this outlook for the last 13 periods.
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