Strengthening of labor market is bullish for Australian dollar
The Reserve Bank of Australia held its policy unchanged at June 4 policy meeting. The fall in unemployment to 5.5% in May from 5.7% in April was bullish development. Will the Australian dollar continue strengthening?
On the daily timeframe AUDUSD: D1 is rebounding after hitting five-month low in the beginning of May. The price has risen above the 200-day moving average MA(200).
- The Donchian channel indicates uptrend: it is tilted upward.
- The Parabolic indicator gives a buy signal.
- The MACD indicator is above the signal line and the gap is widening, which is a bullish signal.
- The stochastic oscillator has bounced off from the oversold zone threshold and is rising.
We believe the bullish momentum will continue after the price closes above the upper boundary of Donchian channel at 0.7635, confirmed also by fractal high. This level can be used as an entry point for placing a pending order to buy. The stop loss can be placed below the Parabolic signal at 0.747. After placing the order, the stop loss is to be moved every day to the next fractal low, following Parabolic signals. Thus, we are changing the probable profit/loss ratio to the breakeven point. If the price meets the stop loss level (0.747) without reaching the order (0.7635), we recommend cancelling the position: the market has undergone internal changes which were not taken into account.
Summary of technical analysis:
| Position | Buy |
| Buy stop | Above 0.7635 |
| Stop loss | Below 0.747 |