While the first reaction following the interest rate announcement from the Reserve Bank of Australia was muted, the monetary policy statement and some other reports released later, pushed the Aussie sharply higher against almost all the majors. RBA left its main interest rate at 1.5% as expected while the RBA Governor Philip Lowe outlined the economic slowdown in the first quarter of the year and predicted that the growth will continue to increase gradually over the next couple of years. He also stated that he anticipates growth to be a little above 3%.
The current account deficit of the country contracted to AU$3.1 billion in the first quarter, versus AU$3.5 billion before adding to the signs that economy is performing well. Later in the day, the Australian Industry Group revealed that the construction index soared up to 56.7 in May from 51.9 before and afterwards, GDP bolstered, even more, the domestic currency. The Australian economy expanded by 1.7% annually in Q1 2017, and even though it is well below Q4 2016 growth of 2.4% as RBA Governor acknowledged, it is above market expectations of 1.5%.
AUD/USD Jumped and Met Our Suggested Targets
The Australian dollar is having an aggressive buying interest against the U.S. dollar as it completed the fourth consecutive bull day. The AUD/USD pair met exactly our first recommended target at 0.7515 (see technical analysis here: http://bit.ly/2sGrGwz) during yesterday’s trading period and struggled beneath it for a couple of hours. Now, the price approached also our second level at 0.7550 and if jumps above it will hit the 0.7610 resistance handle. The price surged more than 1.4% so far this week and surpass successfully the three simple moving averages (50, 100 and 200) on the daily chart.
From the technical point of view, on the same timeframe, the RSI indicator is strengthening and is moving slightly below the overbought area while the strong momentum helped the index to jump above the negative path. The MACD oscillator entered the positive path after a long time and it lies well above its trigger line.
Analysis by JFD Research