The market has been speculating about the possibility of interest rates cuts by the Bank of Australia (RBA), which may also affect the weakness of the Australian currency. The argument for cutting interest rates is to be a drop in property prices, deterioration of sentiment among consumers or the economic slowdown in China due to a trade war, which may also affect the economy of Australia.
The labor market, which was very strong, came to the list of arguments today, which could have put off a cut in interest rates over time. However, both yesterday's publication of the wage index and today's data on the unemployment rate caused that the probability of interest rate cuts at the June RBA meeting increased to 60 percent from 40 percent before the publication of macroeconomic data.
In April, the unemployment rate in Australia increased to 5.2 percent. This is the highest level for 8 months. The number of unemployed increased in April by 21,200 to 703,900. As a result, the first notes and comments from financial institutions started to appear, which assume that interest rates will be cut in this holiday. Morgan Stanley Bank maintains that the first RBA rate cut will take place in August, as the current data is not that disappointing and the RBA will not change interest rates in June. However, another weak publication next month may increase the chances for a rate cut in July.
Meanwhile, AUD/USD fell below 0.6900, which means the lowest level since January.
Line chart: AUD/USD, W1. Conotoxia trading platform
Looking at the line chart, which eliminates the flash crash from the beginning of the year, we can observe the breakout from the triangle pattern. This formation is usually a structure that continues the trend. The textbook target after breaking out may be located in the area of 0.6775, and the area around 0.7040 remains the key resistance.
Daniel Kostecki, Chief Analyst Conotoxia Ltd.
Materials, analysis and opinions contained, referenced or provided herein are intended solely for informational and educational purposes. Personal Opinion of the author does not represent and should not be constructed as a statement or an investment advice made by Conotoxia Ltd. All indiscriminate reliance on illustrative or informational materials may lead to losses. Past performance is not a reliable indicator of future results.
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