AUDUSD: Forex Technical Analysis – Participants expect reduction in Australia’s budget deficit

By IFCMarkets

Market participants expect a reduction in Australia’s budget deficit

The Australian dollar reached a 6-week high on the background of government forecasts to accelerate the reduction in the budget deficit. Will the AUDUSD quotes continue to grow?

The Treasurer of Australia Scott Morrison announced that the state budget deficit will reduce to A$23.6 bln ($18.05 bln) by June 2018. This is markedly lower than the previous estimate of A$29.4 bln. In future, an additional deficit reduction to A$20.5 bln in 2018/19 is expected and further on- to A$10.2 bln in 2020/21. Such positive forecasts may allow Australia to maintain the highest AAA credit rating by S&P Global Ratings despite the current “negative” outlook. Significant economic data- the trade balance for November, will come out on January 5, 2018 in Australia.

On the daily timeframe, AUDUSD: D1 switched from the falling trend to neutral. An upward correction of quotes is possible in case of the publication of negative economic indicators in the US and positive ones in Australia.

• The Parabolic indicator gives a bullish signal.
• The Bollinger bands have narrowed, which means lower volatility. They are tilted upwards.
• The RSI indicator is above 50. It has formed a positive divergence.
• The MACD indicator gives a bullish signal.

The bullish momentum may develop in case AUDUSD exceeds the upper Bollinger band and the 200-day moving average line at 0.77. This level may serve as an entry point. The initial stop loss may be placed below the lower Bollinger band and the Parabolic signal at 0.75. After opening the pending order, we shall move the stop to the next fractal low following the Bollinger and Parabolic signals. Thus, we are changing the potential profit/loss to the breakeven point. More risk-averse traders may switch to the 4-hour chart after the trade and place there a stop loss moving it in the direction of the trade. If the price meets the stop level at 0.75 without reaching the order at 0.77, we recommend cancelling the position: the market sustains internal changes that were not taken into account.

Summary of technical analysis

Market Analysis provided by IFCMarkets