The Asian session on Friday was rather quiet – the major currency pairs of the major group showed sluggish dynamics, continuing to slowly (rather by inertia) move in the previously set direction. And only the Australian dollar paired with the US currency surprised by increased volatility – it pushed off the weekly low of 0.6850 and sharply headed towards the 69th figure. But despite the fact that the price increase is now impulsive, you should not trust it – the aussie is being adjusted based on one macroeconomic report, which unexpectedly came out better than expected. This is clearly not enough for a trend reversal, as many other fundamental factors play against the Australian currency. Accordingly, it is risky to open short positions for the AUD/USD pair now, especially in anticipation of the release of data on the growth of the American labor market (Nonfarm).
The immediate reason for the growth of the Australian dollar was the November report on the volume of retail trade, which was published today, during the Asian session. This indicator has been declining over the previous three months, reaching 0.2% in October. According to forecasts, the indicator was supposed to rise to 0.4% in December. However, in reality it came out much higher – at around 0.9%. This is the strongest growth rate in the last two years (at the end of the fall of 2017, the indicator grew by 1.1%). This fact made it possible for the bulls to seize the pair’s initiative, slowing down, firstly, the development of the downward trend, and secondly, allowing the pair’s buyers to partially regain the lost positions. At the same time, it is unlikely that recent events will radically turn the tide for the pair – in just a few hours, at the beginning of the US session, traders will reorient themselves towards the dynamics of the US dollar, which in turn will respond to the Nonfarm data. The Australian currency still does not have its own arguments for its growth – and even the above report raises certain questions.
According to some experts, the abnormally strong growth of the indicator is explained by the pre-Christmas period, during which the so-called “Black Friday” and “Cyber Monday” took place. The Australians, apparently, decided to take advantage of significant discounts, actively buying up goods as gifts for Christmas. As a rule, growth in consumer activity is observed in December, immediately before the winter holidays. But in 2019, according to many analysts, the consumer boom moved to November, due to significant discounts. If these assumptions are correct, then the December indicator of retail sales will look faded compared to November, although the market will expect a corresponding New Year’s growth.
It is quite obvious that the positive report on the growth of consumer activity during the period of massive seasonal discounts will be ignored by the members of the Reserve Bank of Australia. Moreover, in recent times, the likelihood of monetary easing by the RBA has only increased – especially after the release of mixed data on the growth of the labor market in the country. The increase in the number of employed was primarily due to the increase in the component of part-time employment, while full-time employment showed an extremely weak result. According to the minutes of the last meeting of the Australian regulator, the central bank is ready for further actions to mitigate the monetary policy, but so far it is evaluating the effectiveness of the measures already taken. At the same time, the regulator’s members focused on the labor market and the weak growth of the national economy. Let me remind you that according to the latest data, the volume of GDP fell to 0.4%, while the general forecast was at the level of 0.5%. In annual terms, the country’s economy slowed to 1.7%. Australia’s GDP has been declining since the middle of last year, largely due to lower consumer spending. For example, expenses increased by 0.1% in the third quarter – this is the weakest result since 2008.
Thus, an unexpected surge of optimism for the AUD/USD pair may be short-term. The report itself, which actually served as the starting point for the correction of the pair, is not able to change the attitude of the RBA members to the prospects of monetary policy, which means that the influence of this fundamental factor will be short-term.
From a technical point of view, the situation has not changed since yesterday. The pair is still between the middle and lower lines of the Bollinger Bands indicator on the daily chart. In addition, the Ichimoku indicator generated the Dead Cross signal, in which the Tenkan-sen and Kijun-sen lines are above the price, and the Kumo cloud is below it. All this suggests that the pair still has the potential to decrease, up to the lower boundary of the above cloud, that is, to around 0.6800. If, the price movement is impulsive after the release of US Nonfarms data, the pair may break through this level of support, gaining a foothold in the region of the 67th figure.