Yesterday, the AUD/USD bears tried to consolidate within the level of 0.71 amid the general strengthening of the US currency. The US dollar index updated its annual high on Wednesday, reaching the level of 94.407. The last time this figure was at such heights was at the end of September 2020. It is worth noting that the US dollar is rising amid growing Treasury yields, Fed hawkish intentions, and rising anti-risk sentiment due to the global energy crisis.
Macroeconomic reports also provided indirect support to the US dollar. And although yesterday's release was secondary, it successfully, and most importantly, completed the overall fundamental picture in time. We are talking about the volume of unfinished transactions for the sale of housing. This indicator is an early indicator of business activity in this area. It was in the negative zone for two months (in June and July), but the August figures surprised traders with their growth: the index surged from -2% to +8.1% in monthly terms. This release usually affects the dollar only with significant fluctuations, and yesterday was just the case. It is also worth recalling that very good data on the sale of housing in the primary US market were published last week. All this suggests that the US housing market began to recover again in August.
It is clear that this macroeconomic report has only acted as an additional puzzle in the overall fundamental picture. But on the wave of other factors, it helped to strengthen the US dollar's position.
In turn, the Australian dollar still has no counter-argument against the US currency. For example, the last Australian Nonfarm data put a huge point on the issue of a possible acceleration of the pace of curtailing the RBA stimulus program. The employment growth rate decreased by 146 thousand – this indicator collapsed into the negative area for the first time since April, declining at the strongest pace since May 2020, when Australia was first covered by a wave of the coronavirus crisis. The share of the working-age population has also fallen – this indicator has dropped to 65.2% from the previous value of 66%. The Australian economy is reaping the benefits of quarantine restrictions, while the epidemiological situation in the country continues to be difficult.
The largest states of the country are in the grip of quarantine restrictions, which they promised to ease only after the vaccination of 80% of residents. According to the forecasts of the Federal Ministry of Health, New South Wales and the Australian Capital Territory will reach this value by the end of October, while the state of Victoria will do so in mid-November. However, it is also worth considering the fact that by this point, COVID-19-related benefits will be canceled in Australia. The Australian government said that as soon as quarantine restrictions are lifted, enterprises and companies will no longer receive subsidies to pay those workers who are forced to perform their duties due to the pandemic.
In other words, given the prolonged quarantine, it can be assumed that the main macroeconomic indicators (primarily in the labor sector) will show negative dynamics in the coming months. During the last RBA meeting, the members of the regulator said that they expect, in particular, a decline in GDP in the third quarter due to quarantine restrictions. Such prospects put background pressure on the Australian dollar.
During the Asian session on Thursday, the AUD/USD pair showed slight upward correction, returning to the area of the level of 0.72. Such price dynamics were caused by the temporary weakening of the US dollar. To be more precise, the US dollar only suspended its offensive, reacting to yesterday's words of Jerome Powell, although the theses voiced sounded more in favor of the US currency than vice versa. But apparently, traders paid attention to the published headlines, obscuring the essence of his rhetoric.
So, Powell's quote appeared in the news feeds yesterday that "the increase in inflation is temporary." According to the Fed Chairman, the price surge occurred due to a combination of many factors, among which there are interruptions in supplies amid very high demand. He believes that such an inflationary jump will not lead to a steady increase in inflation. But at the same time, he assured those present that the regulator would react to inflation if it remained "at too high values" for "too long."
On another note, several experts said that the growth of the oil market may provoke another round of inflationary growth in the United States. Due to this, there is an increase in the profitability of treasuries, which "pulls" the dollar.
Therefore, it is advisable to use the current upward correction of AUD/USD to open short positions. This is also indicated by the technical picture. The pair on the daily chart is located between the middle and lower lines of the Bollinger Bands indicator and under all the lines of the Ichimoku indicator, which shows a bearish "Line Parade" signal. The nearest downward target is the 0.7150 mark – this is the lower line of the Bollinger Bands on the same timeframe. The main target is the "round" level of 0.7100, which corresponds to the lower line of the Bollinger Bands, but only on the weekly chart.
