Mario Blascak, PhD
Independent Analyst
- The AUD/USD crawls higher to gain some 0.3% and trade at around 0.7200 supported by the upward sloping trendline.
- The prospects of a solid Australian labor market in November underpin Aussie.
- The US Federal Reserve is expected to raise the target range for Fed funds to 2.25%-2.50%, but the monetary policy outlook is in the focus.
- The global equity markets selloff and a pinch of salt from growth perspectives pull US Dollar a bit lower ahead of key risk event tomorrow.
The AUD/USD is trading up 0.3% at around 0.7200 on Tuesday before the key economic reports are due on Wednesday and Thursday, December 19-20. The Australian labor market is expected to remain solid in creating 20.0K new jobs in November with the unemployment rate stuck to 5.0%. The main driver for the currency pair stems from the outlook for the US monetary policy from the Federal Reserve.
The markets focused on the outlook for Fed policy in 2019 with policymakers possibly signaling the pause to its rate hiking cycle while delivering broadly expected rate hike in December.
The explicit mention of the rate hiking pause would be a strong bullish signal for AUD/USD although such a scenario is not expected. The markets expect Fed to repeatedly underline the conditionality and data dependency for the future policy move.
Global equities are selling off ahead of Fed meeting with markets reacting a bit negatively to prospects of slower global trade and lower GDP growth rate in near future.
Technically the AUD/USD is supported by a trendline connecting the cyclical low on AUD/USD at 0.7020 and last Friday’s low of 0.7150. The technical oscillators are pointing higher from below neutral levels and the Slow Stochastics made a bullish crossover in the oversold territory on a daily chart. The AUD/USD is poised to benefit from a solid labor market report and the uncertainty regarding the Federal Reserve’s outlook for monetary policy. The currency pair should, therefore, remain supported by the trendline support heading higher towards 0.7280 representing the immediate target and a 23.6% Fibonacci retracement of a fall from 2018 high of 0.8100 to 0.7020 cyclical low.
AUD/USD daily chart
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