Aussie Rises on Strong Energy, Resources Export View

Aussie Rises on Strong Energy, Resources Export View
April 17, 2017

 
Last week, the Easter break and a pause in Brexit related talks shifted the momentum in favour of the Pound. On the other hand, a sharp fall in the price of iron ore led the Aussie downwards. On this basis, the GBPAUD pair rallied to a high of 1.6720, before closing at 1.6520 on Friday. While the upcoming elections in France and the associated political uncertainty supports a stronger Pound, we still feel that the GBPAUD pair would decline this week due to the reasons provided underneath.

The initial statements from the European Union, and in particular the German officials, seem to suggest that a hard Brexit is on line. The Brexit summit is scheduled on April 29th. Tim Riddell, economist at Westpac Bank in London, believes that more and more tough rules would be placed on the desk as the talks move forward. Riddell is also of the opinion that several EU members would queue up to take their UK pie. In the process, strong statements would be made and that could considerably affect the Sterling. The Bank of England had recently warned about the possibility of a strong rise in consumer prices coupled with a low wage growth. That seems to come true as evident from the sluggish economic data. The soft housing data and a dip in consumer confidence indicate that consumers would tighten their purse strings.

According to the Resources and Energy report published by the Australian Department of Industry, Innovation and Science, the decline in the price of iron ore will not have a considerable impact on the revenues of Australian government. The iron ore is projected to trade at $55 per ton in the fourth-quarter of fiscal 2017. Even then, according to the report, export earnings from iron ore is anticipated to reach a record high in 2017-2018. Furthermore, overall revenues from resources and energy export are expected to be $215 billion in 2016-17 and 2017-18. The main reason for such a bullish projection is the 40% rise in LNG export volumes in 2016. The export of LNG is expected to double in the next three years. So, it is expected to offset the revenue loss, if any, from the decline in the shipments of iron ore or coking coal.

The Australian employment data released on Thursday showed that the economy added 60,900 jobs in the period between February and March. The markets were expecting only an addition of 20,000 jobs. More importantly, the full-time jobs increased 75,000, while part-time jobs decreased 14,000. The unemployment rate stood unchanged at 5.9%. Thus, economic data and export outlook indicate that the Aussie dollar would strengthen against the Pound in the short-term.

The GBPAUD pair has started declining after facing stiff resistance after 1.6660. The bearishness is also confirmed by the crossover of the MACD indicator’s main line below the signal line. Furthermore, the ascending trend line was broken as well. Thus, we can expect the pair to drift downwards.

GBPAUD - Technical Analysis - 17th April 2017

By going short in the GBPAUD pair near 1.6520, a Forex trader can look forward to gain from the potential downtrend. The stop loss and take profit orders are recommended to be placed at 1.6640 and 1.6350, respectively.

Investing in a binary put option is suggested on the basis of analysis. For better chances of success, the contract should not expire before April 25th and the investment should be made when the cross trades near 1.6520.

Sammy

Sammy

Sammy is our forex expert, with over 20 years experience in the financial sector, she will be keeping you up to date with the ups and downs of currencies around the world


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