Australian Dollar Vs US Dollar, Euro, New Zealand Dollar – Price Setups:AUD has recouped some losses ahead of RBA rate decision.A hike could allevia
Australian Dollar Vs US Dollar, Euro, New Zealand Dollar – Price Setups:
- AUD has recouped some losses ahead of RBA rate decision.
- A hike could alleviate some of the downside risks in AUD.
- What’s next for AUD/USD, AUD/NZD, and EUR/AUD?
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How to Trade AUD/USD
The Australian dollar has recouped some losses against some of its peers as the Reserve Bank of Australia interest rate pause doubts grow following the hike in the minimum wage.
Australia’s Fair Work Commission last week decided on a 5.75% pay hike for workers on awards with wages linked to movement in the minimum wage and 8.6% for the lowest-paid employees. The rise could push up wage growth/inflation expectations, requiring higher interest rates to tackle still-high inflation.
The market is pricing in a 30% chance of a 25-basis-point rate hike at RBA meeting Tuesday, with the benchmark rate to reach 4.18% by September from the current 3.85%. However, the minimum wage hike implies an upside risk to the interest rates, keeping AUD supported, at least against some of its peers. Meanwhile, risk appetite received a boost after the US House of Representatives last week passed the debt ceiling bill. And, going forward any stimulus from China could improve AUD’s prospects.
AUD/USD Daily Chart
Chart Created by Manish Jaradi Using TradingView
AUD/USD: False break lower?
AUD/USD’s failure to sustain losses following the break under crucial support on a horizontal trendline from November at about 0.6585 has raised the prospect of a false break. However, unless AUD/USD breaks above the crucial barrier at 0.6805, the path of least resistance remains sideways to down. See “Australian Dollar Looking Vulnerable: AUD/USD, AUD/JPY, AUD/CAD Price Action”, published May 25.
EUR/AUD Daily Chart
Chart Created by Manish Jaradi Using TradingView
EUR/AUD: Risks deeper correction
EUR/AUD’s sharp retreat last week raises the risk of a deeper setback in the near term. This follows a retreat last month from a tough barrier at the October 2020 high of 1.6825. A vital cushion is at the early-May low of 1.6130. Any break below could pave the way toward 1.5950-1.6000 (including the December high and the 89-day moving average). For more discussion see “Australian Dollar Ahead of Retail Sales: AUD/USD, EUR/AUD, GBP/AUD Price Setups”, published May 23.
AUD/NZD Daily Chart
Chart Created by Manish Jaradi Using TradingView
AUD/NZD: At the top end of the range
Upward momentum in AUD/NZD has shot up following the hold above a crucial floor at the April low of 1.0585. The cross is now testing a vital ceiling on the 200-day moving average, coinciding with the April high of 1.0925. Given the significance of the resistance, AUD/NZD’s rally could pause a bit, especially given the RBA interest rate decision tomorrow. However, any break above 1.0925 would trigger a double bottom, potentially opening the door initially toward the February high of 1.1085, potentially toward 1.1250.
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— Written by Manish Jaradi, Strategist for DailyFX.com
— Contact and follow Jaradi on Twitter: @JaradiManish
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