AUD/USD is now trading marginally higher on the day, with Australian currency finding some love in the wake of an upbeat December quarter wage price index – the metric used by the Reserve Bank of Australia and the Treasury to gauging wage growth.
While economists expected 0.3% quarter-on-quarter wage growth in the final three months of 2020 following a meager 0.1% increase in the previous three months, the actual figure came in at 0.6%, beating projections. In annualized terms, wages grew 1.4% versus 1.1% expected and 1.4% previous.
The progress in pay rise, alongside a continued drop in the unemployment rate, is good news for the Aussie dollar.
So far, however, the Aussie bulls have been cautious in cheering the data. The AUD/USD pair has added around ten pips to trade near 0.7922, representing a 0.15% rise on the day. The slow ascent could be associated with the surprise contraction in the construction sector in the final quarter of 2020.
Construction Work Done fell by 0.9% in Q4, missing the expected 1% rise by a big margin following the preceding quarter’s 1.8% decline.
The pair, however, could challenge and break above 0.7917 – the high of Tuesday’s indecisive Doji candle – later today if the stock markets pick up a bid and treasury yields drop in response to the Federal Reserve Chairman Jerome Powell’s dovish testimony.
The message that came out from Powell’s speech to Congress was that the economy remains a long way from the Fed’s goals. The central bank remains committed to current accommodation and asset purchases at least at the current pace.
Besides, expectations for large US fiscal stimulus supports the reflation theme and could keep commodities better bid, helping the AUD maintain its bullish trajectory.
Technical levels
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