The Australian dollar remained under pressure as the market waited for the first budget by the Labor government.
Sell the AUD/USD pair and set a take-profit at 0.6200.Add a stop-loss at 0.6365.Timeline: 1 day.
Set a buy-stop at 0.6325 and a take-profit at 0.6450.Add a stop-loss at 0.6250.
The AUD/USD price retreated slightly ahead of the upcoming government budget and after Xi Jinping’s new mandate. It dropped to a low of 0.6297, which was slightly lower than last week’s high of 0.6400.
Australia budget ahead
The Australian dollar remained under pressure as the market waited for the first budget by the Labor government. According to Deloitte, the budget will benefit from an additional A$114.4 billion in government revenue in the next four years. The budget deficit is expected to drop to about A$45.5 billion.
Meanwhile, the budget is expected to show that the Australian economy will grow by 3.25% this year and then half to 1.5% in 2023 to 2024. Other parts of the government’s budget will be on childcare, education, infrastructure, and public service.
This budget comes at a time when the Australian economy is in a slow recovery. The unemployment rate remains low as many companies complain about an ongoing labor shortage. Estimates say that Australia has the second-worst labor shortage in the developed countries after China. Australia will publish its latest inflation data later this week.
The next key catalyst for the AUD/USD pair will be the upcoming American consumer confidence data. Economists polled by Reuters expect that consumer confidence declined slightly in October as inflation remained at an elevated level.
Consumer confidence is an important figure because their spending is the biggest constituent of the American economy. As such, highly confidence consumers tend to spend more money and spur economic growth.
The US will also publish the latest house price index (HPI) for August. With interest rates and mortgage rates rising, consensus is that house prices continued dropping. It dropped by 0.6% in August, continuing a trend that started in February.
The AUD/USD pair has been in a slow upward trend in the past few days and formed an ascending channel. It is now between this channel and slightly below the 50-period moving average. The Relative Strength Index (RSI) has moved from 65 to about 50.
The pair has also moved below the important resistance at 0.6363, which was the lowest level on September 28. Therefore, the Aussie will likely continue falling as sellers target the key support at 0.6200. The stop-loss of this trade will be at 0.6365.