Never miss a story from David Song

Subscribe to recieve updates on publications
Please enter valid First Name
Please fill out this field.
Please enter valid Last Name
Please fill out this field.
Please enter valid email
Please fill out this field.
Please select a country

I’d like to receive information from Daily FX and IG about trading opportunities and their products and services via email.

Please fill out this field.

Your Forecast Is Headed to Your Inbox

But don't just read our analysis - put it to the rest. Your forecast comes with a free demo account from our provider, IG, so you can try out trading with zero risk.

Your demo is preloaded with £10,000 virtual funds, which you can use to trade over 10,000 live global markets.

We'll email you login details shortly.

Learn More about Your Demo

You are subscribed to David Song

You can manage you subscriptions by following the link in the footer of each email you will receive

An error occurred submitting your form.
Please try again later.

Trading the News: Australia Wage Price Index (WPI)

Updates to Australia’s Wage Price Index (WPI) may keep AUD/USD under pressure as the gauge for household earnings is expected to hold steady at 2.1% per annum for the fourth consecutive quarter.

Image of DailyFX economic calendar

Signs of subdued wage growth should keep the Reserve Bank of Australia (RBA) on the sidelines as ‘household income has been growing slowly and debt levels are high,’ and Governor Philip Lowe & Co. may merely attempt to buy more time at the next meeting on September 4 as ‘the low level of interest rates is continuing to support the Australian economy.

The wait-and-see approach for monetary policy may continue to foster a long-term outlook for AUD/USD especially as the Federal Reserve appears to be on track to deliver four rate-hikes in 2018, but an unexpected pickup in Australia wage growth may spur a bullish reaction in the aussie-dollar exchange rate as it puts pressure on the RBA to lift the official cash rate (OCR) off of the record-low. Sign up and join DailyFX Currency Analyst David Song LIVE for an opportunity to discuss potential trade setups!

Impact that Australia WPI has had on AUD/USD during the previous release

Period

Data Released

Estimate

Actual

Pips Change

(1 Hour post event )

Pips Change

(End of Day post event)

1Q

2018

05/16/2018 01:30:00 GMT

2.1%

2.1%

-10

+41

1Q 2018 Australia Wage Price Index (WPI)

AUD/USD 15-Minute Chart

Image of audusd 15-minute chart

Wage growth in Australia was largely unchanged during the first three-months of 2018, with the headline reading increasing 2.1% per annum for the third consecutive quarter. Signs of subdued wage growth is likely to keep the Reserve Bank of Australia (RBA) on the sidelines throughout 2018 as ‘one continuing source of uncertainty is the outlook for household consumption,’ with the Australian dollar at risk of facing headwinds over the coming months as the central bank remains in no rush to lift the official cash rate (OCR) off of the record-low.

Nevertheless, the market reaction was short-lived, with AUD/USD climbing back above the 0.7500 handle to end the day at 0.7515. Learn more with the DailyFX Advanced Guide for Trading the News.

AUD/USD Daily Chart

Image of audusd daily chart
  • Keep in mind, broader outlook for AUD/USD remains tilted to the downside as price & the Relative Strength Index (RSI) track the downward trends from earlier this year, with recent developments in the momentum indicator highlighting the risk for a further decline in the exchange rate as the oscillator snaps the bullish formation carried over from June.
  • Will keep a close eye on the RSI as it approaches oversold territory, with a break below 30 raising the risk for a further decline in the exchange rate as it suggests the bearish momentum is gathering pace.
  • Need a break/close below the 0.7180 (61.8% retracement) to 0.7230 (61.8% expansion) region to open up the next downside hurdle around 0.7090 to 0.7110 (78.6% retracement).

Additional Trading Resources

New to the currency market? Want a better understanding of the different approaches for trading? Start by downloading and reviewing the DailyFX Beginners Guide!

Are you looking to improve your trading approach? Review the ‘Traits of a Successful Trader series on how to effectively use leverage along with other best practices that any trader can follow.

--- Written by David Song, Currency Analyst

Follow me on Twitter at @DavidJSong.