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AUD/USD Rebound to Gather Momentum on Sticky Australia Wage Growth

AUD/USD Rebound to Gather Momentum on Sticky Australia Wage Growth

Talking Points:

- AUD/USD Rebound to Gather Momentum on Sticky Australia Wage Growth.

- USDOLLAR Weakness to Persist on Lackluster FOMC Minutes.

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AUD/USD Daily Chart

Chart - Created Using FXCM Marketscope 2.0

  • Longer-term outlook for AUD/USD remains tilted to the downside as the pair fails to preserve the bullish trend from earlier this year, but aussie-dollar may face a larger rebound over the coming days as it continues to hold above former resistance around 0.7240 (100% expansion) to 0.7270 (38.2% retracement), while the Relative Strength Index (RSI) comes off ahead of oversold territory.
  • With Australia’s Wage Price Index (WPI) anticipated to expand another annualized 2.2% during the first three-months of 2016, stickiness in household earnings may boost the appeal of the higher-yielding currency as the Reserve Bank of Australia (RBA) appears to be in no rush to further support the real economy.
  • Will watch former support zones for new resistance, with the first area of interest coming in around 0.7380 (50% retracement) to 0.7390 (78.6% expansion), followed by 0.7490 (61.8% retracement) to 0.7500 (61.8% expansion).
  • The DailyFX Speculative Sentiment Index (SSI) shows the retail FX crowd remains net-long AUD/USD since May 3, with the ratio hitting a near-term extreme earlier this month as it climbed to +2.00.
  • The ratio currently sits at +1.53 as 61% of traders are long, with short positions 3.9% higher from the previous week even as open interest stands 1.5% below the monthly average.

Why and how do we use the SSI in trading? View our video and download the free indicator here

USDOLLAR(Ticker: USDollar):

IndexLastHighLowDaily Change (%)Daily Range (% of ATR)
DJ-FXCM Dollar Index11901.7511931.0711893.72-0.2367.03%
USDOLLAR Daily Chart

Chart - Created Using FXCM Marketscope 2.0

  • Despite signs of sticky price growth in the U.S. economy, the USDOLLAR may continue to give back the advance from earlier this month as it preserves the descending channel formation from back in January, while Fed Fund Futures still show a less than 10% probability for a Fed rate-hike at the next quarterly meeting in June.
  • The Federal Open Market Committee (FOMC) Minutes may do little to heighten the appeal of the greenback amid the ongoing 9 to 1 split, and more of the same from central bank officials may ultimately produce near-term headwinds for the dollar as market participants push out bets for higher borrowing-costs.
  • A closing price below 11,898 (50% retracement) may raise the risk for a further decline in the U.S. dollar, with the next downside region of interest coming in around 11,836 (61.8% retracement) to 11,843 (38.2% retracement).
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--- Written by David Song, Currency Analyst

To contact David, e-mail Follow me on Twitter at @DavidJSong.

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DailyFX provides forex news and technical analysis on the trends that influence the global currency markets.