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Trading the News: Australia Wage Price Index (WPI)

Updates to Australia’s Wage Price Index (WPI) may fuel the recent rebound in AUD/USD as household earnings are projected to increase 2.3% after climbing 2.1% per annum in the second-quarter of 2018.

Image of DailyFX economic calendar

Indications of stronger wage growth may heighten the appeal of the Australian dollar as it puts pressure on the Reserve Bank of Australia (RBA) to alter the monetary policy, and the central bank may start to adopt a hawkish tone in 2019 as ‘economy is performing well.’

In turn, a WPI print of 2.3% or higher may trigger a bullish reaction in AUD/USD, but a lackluster development may spur a near-term pullback in the exchange rate as Governor Philip Lowe & Co. appear to be in no rush 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 last release

Period

Data Released

Estimate

Actual

Pips Change

(1 Hour post event )

Pips Change

(End of Day post event)

2Q

2018

08/15/2018 01:30:00 GMT

2.1%

2.1%

-13

+10

2Q 2018 Australia Wage Price Index (WPI)

AUD/USD 15-Minute Chart

Image of audusd 15-minute chart

Australia’s Wage Price Index (WPI) climbed 2.1% per annum in the second-quarter after expanding a revised 2.0% during the first three-months of 2018. The unexpected downward revision for the previous period is likely to keep the Reserve Bank of Australia (RBA) on the sidelines as ‘household income has been growing slowly and debt levels are high,’ and the central bank appears to be in no rush to lift the official cash rate (OCR) off of the record-low as ‘the low level of interest rates is continuing to support the Australian economy.

The lackluster updates sparked a limited reaction, with AUD/USD largely consolidating throughout the day as it bounced back ahead of the 0.7200 handle to end the day at 0.7239. Learn more with the DailyFX Advanced Guide for Trading the News.

AUD/USD Daily Chart

Image of audusd daily chart
  • Keep in mind, AUD/USD appears to be responding to trendline resistance, with the failed attempt to test the September-high (0.7315) undermining the advance from the 2018-low (0.7085) especially as the exchange rate carves a series of lower highs & lows.
  • In turn, a break/close below the 0.7170 (23.6% expansion) to 0.7180 (61.8% retracement) region opens up the 0.7090 (78.6% retracement) to 0.7110 (78.6% retracement) area, with the next downside hurdle coming in around 0.7020 (50% expansion, which largely lines up with the 2018-low (0.7021).

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.