AUDUSD Longs Recommended – Australian Economic Data Supportive
The Aussie is in an up move against the greenback after remarkable data reported improvements in employment conditions and investment confidence.
On Tuesday (12/7), the Australian dollar experienced a sharp spike upwards, following unexpectedly positive data from the National Australia Bank business survey. The sub-index which measures business confidence rose to a reading of 6.00 in June, three points above the reading seen in May. Meanwhile, business conditions index soared to 12 points, well above its long-run average of 5. Since this survey was undertaken in the shadow of financial market volatility, including the historic Brexit referendum and the possibility of Australia losing its Triple-A credit rating, the markets are showing a little relief over the country’s current economic state.
Furthermore, reports from the Australian Bureau of Statistics (ABS) earlier today (14/7) indicated that employment grew modestly by 7,900 in June, missing the forecast of a 10,100 number. This statistic fell significantly from the reading of 19,200 jobs added in May. Nevertheless, the rise in employment took the total number of employed people to 11.94 million, the highest level on record. Also, a sharp surge of 38,400 in full-time jobs has offset the slightly disappointing monthly result and was welcomed by investors.
Meanwhile, according to data from the U.S Treasury Department on Wednesday (13/7), the federal budget balance registered at a less-than-expected surplus of $6 billion in June, from 53.0 billion deficit in the preceding month. The reported result was far below the forecast of a 24 billion surplus, resulting in the year-to-date deficit adding up to the highest level in 2 years at $401 billion, up 27% from a year earlier, as a result of weaker corporate tax revenues.
On the other hand, U.S economy is currently witnessing some positive signs, especially a strong rebound in the labor market even when the whole world is facing the threat of an impending slowdown in Britain, Europe and Asia lately. Published by the Labor Department on Thursday, the producer price index rose 0.5 percent last month, marking the largest increase since May 2015, after advancing 0.4 percent in May. This advance was led by a surge in energy prices which rose by 4.1% in June, after having increased 2.8% in May.
Meanwhile, a key measure of underlying producer price pressures that excludes food, energy and trade services also rose 0.3 percent in June. The so-called core PPI was up 0.9 percent in the last 12 months, coming close to the target of 2% inflation.
Combined with previous data released, these figures are helping draw a brighter picture of the U.S economy and renew the possibility of a rate hike by the end of this year. Although the chance of the Fed raising interest rates at its July meeting is almost zero, markets are pricing in 36.6% probability that another 0.25 percentage point will be added to the federal funds rate at the last meeting in 2016.
Fig. AUDUSD D1 Technical Chart
On the daily chart, the price action is currently above the moving average, suggesting that the bullish trend is still solid. ADX (14) is ticking up to 50.2997, consolidating the solid uptrend. Additionally, the bull is confirmed further with the RSI surging to as high as 60.86. The 23.6% Fibonacci retracement is acting as a strong support so the price is anticipated to tick up from this level.
Buy Stop at 0.76420, Take Profit at 0.76575, Stop loss at 0.76287.