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Round Up – Australian Unemployment & British Inflation

James Boston
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A 6% unemployment rate is the envy of most countries in the current economic environment. The Australians see it differently, overnight data shows that Australian unemployment has risen by 0.2% from 5.8%. This is leading to speculation that the Reserve Bank of Australia will delay its intended monetary tightening actions, which in turn has triggered a sell off in the Australian Dollar.

AUD/USD fell over 1% to .8928 before recovering to settle in the mid .89s. Despite the fact that the market remains generally bullish on the Aussie Dollar it has to be noted that there is little to support this currency pair above the 0.8698 low set in early January. The recent fall is an opportunity for short term traders only, longer term investors will likely see better buying opportunities over the coming weeks. Apart from Australian fundamentals, Gold prices and Chinese import data are the key figures to track for clues to the longer term direction of the Aussie dollar.

The British Pound is once again testing its long term resistance level against the US Dollar at 1.6633. Sterling remains in demand despite yesterday comments by Bank of England Governor Mark Carney reiterating the Banks reluctance to reverse its loose monetary policy in the face of falling unemployment and low inflation.

There is little in the way of UK data over the coming days lend further impetus to the rise of the British Pound. Technical trading in the next few hours will clearly determine the short term direction of Sterling, a successful break through 1.6633 and there is little in the way of upside resistance, a second failed attempt to break through however will entrench the 1.6633 level as a strong resistance point, at which stage fundamental economics will be required to push GBPUSD higher.

In this regard Consumer Price Index data next Tuesday morning will be the focus of traders attention, a core figure of 1.7% is expected and is well below the target Bank of England level. Creep higher is unlikely to cause ripples but any significant deviation on the downside and the UK monetary authorities will have difficulty in holding their loose monetary policy stance.

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