Latest Australian Economy Overview

Australia's employment fell by 4,300 jobs in April compared to March, which was lower than predicted at +25,000 after two consecutive months of growth. While the unemployment rate has risen to a three-month high of 3.7% from a 50-year low of 3.5%, indicating that the labor market may be cooling, there is still support for the Reserve Bank of Australia (RBA) to stop raising interest rates next month.

Meanwhile, Australia's wage price index increased at its strongest annual rate in a decade last quarter, rising to 3.7% from 3.4%, slightly more than the 3.6% expected. Although the quarterly wage rate increased by 0.8% over the previous quarter, it fell short of forecasts of +0.9%. Annual pay growth is predicted to peak at 4.0% by the end of the year before declining to 3.7% by mid-2025.

Australia's inflation rate, which is presently at 7%, is predicted to recover to the RBA's target range of 2% to 3% by mid-2025. While the Westpac-Melbourne Institute consumer confidence index survey fell in May to a level similar to March's level, which is the lowest level since the outbreak of COVID-19 in 2020 and the level seen during the 1990s recession, following abrupt interest rate hikes from the RBA and federal budget figures that created disappointment and impacted the financial outlook of households and the economy.

However, following the Reserve Bank of Australia's decision to boost interest rates at its May meeting due to the service sector's sustained high inflation risk and a faster-than-expected rent increase amid poor manufacturing growth, the RBA has indicated that further rate hikes may be required. Despite the fact that the futures market expects the RBA to temporarily pause interest rate hikes in June and may raise rates again in August or September, the first rate decrease is projected for March of next year.

The US dollar, on the other hand, fell marginally but remained close to a two-month high due to solid inflation and labor data. The number of applications for jobless benefits continues to speak to a tight labor market, with applicants decreasing more than predicted amid fears over the country's banking sector unraveling and an optimistic outlook on the topic of a possible averted US debt default.

President Joe Biden rejected the latest Republican proposal to debate extending the debt ceiling on Sunday, but offered to cut spending and shift tax rates in order to reach a deal. The last time the United States came dangerously close to a debt ceiling crisis was in 2011, when Congress narrowly avoided a debt default. However, the economy was hit hard by a major shock, including the first-ever downgrade of the US credit rating by S&P and a massive stock selloff.

However, US FFR futures indicate a 33% probability that the Fed would raise interest rates another 25 basis points next month, up from 10% last week. As a result, the Australian dollar is projected to fluctuate within a narrow range and may be weaker than the US dollar.

Data for Technical Analysis (5H) CFD AUD/USD

Resistance : 0.6663, 0.6669, 0.6678

Support : 0.6645, 0.6639, 0.6630          

5H Outlook

Source: Investing.com                       

Buy/Long 1 If the support at the price range 0.6640 - 0.6645 is touched, but the support at 0.6645 cannot be broken, the TP may be set around 0.6664 and the SL around 0.6636, or up to the risk appetite.

Buy/Long 2 If the resistance can be broken at the price range of 0.6663 - 0.6668, TP may be set around 0.6680 and SL around 0.6640, or up to the risk appetite.       

Sell/Short 1 If the resistance at the price range 0.6663 - 0.6668 is touched, but the resistance at 0.6663 cannot be broken, the TP may be set around 0.6640 and the SL around 0.6672, or up to the risk appetite.

Sell/Short 2 If the support can be broken at the price range of 0.6640 - 0.6645, TP may be set around 0.6626 and SL around 0.6668, or up to the risk appetite.       

Pivot Points May 22, 2023 04:12AM GMT

Sources: Investing 1, Investing 2