The Australian dollar has been thriving since the beginning of June what has been partially reflected by a weakness of the US dollar. Moreover, there was quite an impressive jobs report revealed last week which showed a falling jobless rate and a creeping up labor force participation rate at the same time. That’s really upbeat mix regarding an assessment of the jobs market. It’s worth noting that the RBA has voiced lack of confidence as for a durability of improvement in that area.
Furthermore, we got some remarks from governor of the Reserve Bank of Australia on Monday as he argued that the domestic economy was likely to grow faster. While Lowe is not worry about a potential crisis in global jobs market, it points to subdued wage growth as a key issue. Furthermore, he sees a higher debt level amid households among key risks to growth.
Despite such dovish comments Goldman Sachs’ analysts seem to share a little different view. They noticed that Governor Lowe remained upbeat about the cyclical growth recovery, both globally and in Australia and despite plenty of risks out there he recognized that “we are in a better position than we have been for some time” globally.
GS pointed to the strong Australian labor market which had strengthened in recent months. Moving on, GS sees that overall the Governor’s comments continued to emphasize the easing downside risks in the Australian economy; and with growth continuing to recover and financial imbalances still elevated, they believe the current “emergency-level” low interest rate setting is unwarranted, and that financial markets are under-estimating the probability of a gradual tightening cycle commencing by the end of the year. Hence, the bank estimates a first rate hike as soon as November (by 25bps).
Market seems to be outstandingly skeptical when it comes to an idea of a hike in November as there is barely 1% probability of that move. Source: Bloomberg
In turn, taking a glance at the chart below one could expect the pair to continue rising towards the nearest resistance zone located at around 0.7750. The upward momentum is pretty solid after the successful defending of the last support zone.
The AUDUSD seems to be poised to continue its upward trajectory and could eye the resistance placed at around 0.7750. The nearest support for bulls stretches in the vicinity of 0.7720. Source: xStation5
Having said that, let us recall that the Aussie could be already overvalued comparing to iron ore prices or the interest rate market. Besides, please take a look at the technical signal on the Aussie we launched yesterday.