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The Australian Dollar rate stands still at the Forex currency market on Friday, determining movement direction.

Forex forecast: MACD indicator is in the positive area for the pair AUD/USD and continues to go down, however it merged with the signal line, and is not giving a clear signal. Stochastic Oscillator is going down in the neutral zone and is giving a sell signal.

Forex recommendations: off the market.

Feasible event scenario at Forex: in case of breakdown at the level of 1.0660 the pair will go to 1.0630 and 1.0610. If downward breakdown does not take place, the pair will consolidate at the current levels. There is high possibility that aggressive sellers will be back for the pair.

It became known today that index of business activity in the Australian service sector (PSI) declined to 49.9 points in May. Therefore, it fell below the key level of 50 points. In April the indicator grew to 51.5 points.

According to the comments of AIG, such scenario can make households a guilty party because of tight costs control and wary perception of the prospects for the Australian economy. Furthermore, high exchange rate of the AUD puts additional pressure.

Next meeting of the RBA will be held on 7 June. The minutes of the Reserve Bank of Australia meeting of 3 May which were made public earlier stated that growing Australian Dollar has assisted to curb inflation; while interest rate remains at the previous level of 4.75% per annum. 

The RBA admits that if economic situation will develop according to expectations, interest rate increase will become a necessity.

Representatives of the Ministry of Finance in Australia said yesterday that level of GDP is not the way to determine further movement of economy, although the Ministry still expects further improvement in the country’s economic growth.

This comment upset buyers of the AUD and reduced to zero yesterday’s purchases at the high level. We would remind that GDP in Australia fell by 1.2% on quarterly basis (+1.0% y/y) in QI, which is the maximum fall in 20 years. However, decrease in the local economy was not as much as expected, although aftermath of the flooding had a severe impact on exports (the fall of 8.7% in QI which equals to -2.1% of GDP). Despite such state of economy, the market is convinced that the RBA will make the first step towards monetary policy tightening in August this year, interrupting the pause of the previous five meetings

Economists anticipate that second half of the year will be more successful: intake of business investments gives cause to such forecast.

Westpac believes that growth rate of the leading indicators, which helps to assess economic prospects for the next 3-6 months, has stabilized, and shows moderate rate of recovery in the Australian economy.  “The results of the first half of the year might be not the best, due to slowdown in the pace of development in QI, which was caused by weakness in external sector and wholesale inventories”, pointed Westpac.

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