For the last 24 hours, the market volatility drove various stocks and currencies up and down, with huge uncertainties sending doubts to the investors. The US dollar was highly challenged to hold its position, whereas commodity currencies, including the Aussie, were just enjoying the ride. As the appetite for risky assets deteriorated, the upset market players have pushed the Aussie upward after the opening bell on Thursday. The Australian dollar effortlessly extended its gains against the greenback after the drop of consumer inflation expectations in November. Will the momentum stay with the Australian currency amid volatility?
In the Asian session on Thursday, the Australian dollar gained 1.36 percent to 0.7740 against the greenback, the winner among a basket of currencies. At 12:43 UTC, the dollar went moderately steady versus the other currencies. EUR/USD lost 0.13 percent to 1.0897 while GBP/USD declined 0.19 percent to 1.2382 as the investors started to weigh in the consequences of the election results. The stability of the dollar sent the CHF 0.33 percent down and CAD mostly flat.
As the upward momentum continues, the pair had a session high of 0.77402 and a session low of 0.76981 after it opened at 0.77024. The pair is expected to find support at 0.76989 and a fall through could result into a new support level at 0.76840. The pair may have its first resistance at 0.77700 and a rise through could result into a new resistance level of 0.77766. Currently, the pair is trading above its 20 SMA of 0.76682 and has surpassed its 50-SMA of 0.76848. As the pair goes near to the upper band, the bullish momentum for the pair strengthens and a possibility of a significant price increase may appear.
Ahead of the speech of Reserve Bank of Australia Governor Philip Lowe at the Committee for Economic Development of Australia (CEDA) Annual dinner next week, the consumer inflation expectation of Australia declined in November for the third time in the last four months. The RBA has been vocal in making efforts to boost the inflation to achieve its target of 2-3 percent on average, over the cycle. Thus, the drop of outlook from 3.7 percent in October to 3.2 percent in November justified the measures implemented by the RBA to revive the Australian economy.
The improvement of the economic conditions of a nation could be a positive notion for the currency. In most cases, the central bank aims for a rate hike in a stable economic and political environment. At the moment, the official cash rate remains unchanged at 1.50 percent after easing in May and in August meetings. The central bank of Australia looks for a moderate growth of the economy after the slight development of economic sectors.
“The large decline in mining investment is being offset by growth in other areas, including residential construction, public demand and exports. Household consumption has been growing at a reasonable pace, but appears to have slowed a little recently. Measures of household and business sentiment remain above average,” Mr. Lowe stated after the monetary policy decision last November 1.
“Labour market indicators continue to be somewhat mixed. The unemployment rate has declined this year, although there is considerable variation in employment growth across the country. Part-time employment has been growing strongly, but employment growth overall has slowed. The forward-looking indicators point to continued expansion in employment in the near term.”
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