AUD/USD needs more fuel to close above 0.7700
Macroeconomic overview
Minutes of its February meeting showed the Reserve Bank of Australia was in an optimistic mood when it kept rates at a record low of 1.5% for a seventh straight month, following easings in August and May last year.
Economic growth was expected to pick up to 3% by year-end and a shock contraction in the third quarter was only due to “temporary factors”. "The economy was continuing its transition following the end of the mining investment boom," according to the minutes. “Australia’s low cost producers of iron ore were expected to increase output further and ramp up in liquefied natural gas production was expected to make a significant contribution to output growth. The drag on growth from falling mining investment was also expected to diminish.”
The RBA had slashed its near-term forecast for economic growth by a whole percentage point following the third-quarter contraction, but is confident of a rebound over the next two years. Core inflation, currently pinned at a record low of 1.5%, is expected to pick up only gradually to around 1.75% by mid-2017 and might not fully return to the RBA's 2-3% target band until the middle of 2019.
Board members again noted that prices for Australia's key commodity exports had risen sharply in past months, which blessed the country with its largest trade surplus on record in December.
Governor Philip Lowe has repeatedly argued that cutting rates further could encourage a renewed borrowing binge by households who are already heavily indebted, outweighing any economic benefits.
Technical analysis
The AUD/USD remains above the 14-day exponential moving average, but the pace of the AUD appreciation has lowered. The AUD/USD needs more fuel to close above the 0.7700. Tomorrow’s FOMC minutes may support this pair, if they are less hawkish than expected.
Trading strategy
Our short-term AUD/USD long is risk free now, as we raised the stop-loss to the entry point.
GrowthAces.com - Daily Forex Trading Strategies
Minutes of its February meeting showed the Reserve Bank of Australia was in an optimistic mood when it kept rates at a record low of 1.5% for a seventh straight month, following easings in August and May last year.
Economic growth was expected to pick up to 3% by year-end and a shock contraction in the third quarter was only due to “temporary factors”. "The economy was continuing its transition following the end of the mining investment boom," according to the minutes. “Australia’s low cost producers of iron ore were expected to increase output further and ramp up in liquefied natural gas production was expected to make a significant contribution to output growth. The drag on growth from falling mining investment was also expected to diminish.”
The RBA had slashed its near-term forecast for economic growth by a whole percentage point following the third-quarter contraction, but is confident of a rebound over the next two years. Core inflation, currently pinned at a record low of 1.5%, is expected to pick up only gradually to around 1.75% by mid-2017 and might not fully return to the RBA's 2-3% target band until the middle of 2019.
Board members again noted that prices for Australia's key commodity exports had risen sharply in past months, which blessed the country with its largest trade surplus on record in December.
Governor Philip Lowe has repeatedly argued that cutting rates further could encourage a renewed borrowing binge by households who are already heavily indebted, outweighing any economic benefits.
Technical analysis
The AUD/USD remains above the 14-day exponential moving average, but the pace of the AUD appreciation has lowered. The AUD/USD needs more fuel to close above the 0.7700. Tomorrow’s FOMC minutes may support this pair, if they are less hawkish than expected.
Trading strategy
Our short-term AUD/USD long is risk free now, as we raised the stop-loss to the entry point.
GrowthAces.com - Daily Forex Trading Strategies
