In my last post about the AUDUSD pair, I mentioned that if it falls below the neckline of the double bottom, it would likely sink further until it sees some support at 0.8300 or at 0.8100 (kindly check my previous post here). As as you can see, it indeed consolidated into a smaller double bottom after touching 0.8300. It then broke out of this pattern to keep itself back up again above the neckline of the bigger double top formation. In my opinion, those who are long on the Australian dollar would be in a safe position as long as the AUDUSD pair stays above the mentioned significant level (0.8600). Moreover, the pair could further go north since the stochastics are still far from the overbought region. But if fear makes a comeback and the Aussie slides below 0.8600 again, its likely stop would then be at 0.8300.
Just yesterday, the Reserve Bank of Australia kept its interest rate unchanged at 4.50% due to the recent unrest in the global equities markets and Australia’s less-than-stellar CPI and GDP figures.Note that central banks generally hike their rates to control inflation and growth. While the country’s year-over-year CPI in March printed a strong 2.9%, its GDP failed to impress, growing by only 0.50% during the first leg of the year as against the 0.60% prediction. Australia’s housing industry remained damp as seen in the building approval’s 6.6% decline in May. Moreover, Australia’s retail sales continued to fall below the market’s expectation with only a meager 0.2% gain in May.
Despite the above, traders still picked up the Aussie given RBA Governor Glenn Steven’s positive comments regarding the economy. He said that Australia’s expansion would accelerate from its present pace as China grows. Apparently, the governor sees a rapid expansion in the Chinese economy as well as evidenced by their 50% export gain during the last month. Steven highlighted china since it is Australia’s biggest export market. A growth in the Chinese economy, particularly in its exports sector would likewise benefit Australia. But as I’ve mentioned in my post regarding China (kindly see it here), its economy has already started to swing south as evidenced by the breakdown in the Shanghai’s Composite Index. If this is the case, then China’s growth would likely decelerate and so as Australia’s.