During the Asian trading session on Friday, the AUD/USD pair retained strong gains from Thursday, hovering near the 0.7200 mark. This strength in the Australian Dollar (AUD) can be attributed to increasing speculation that the Reserve Bank of Australia (RBA) will implement another interest rate hike in its upcoming monetary policy meeting scheduled for Tuesday.
A recent Reuters poll conducted from April 27 to 30 revealed that out of 33 economists surveyed, 30 predict that the RBA will raise its Official Cash Rate (OCR) by 25 basis points to 4.35%. This hawkish outlook aligns with the rising inflationary pressures observed in Australia. Recent data released on Wednesday indicated that the first quarter Consumer Price Index (CPI) increased at an annualized rate of 4.1%, surpassing expectations and up from the previous reading of 3.6%.
Conversely, the US Dollar (USD) is positioned to close the week on a negative note, largely influenced by Japan’s intervention in the foreign exchange market. The US Dollar Index (DXY), which measures the strength of the dollar against six major currencies, is trading near its 10-day low around 98.00.
A breakdown of the performance of the US Dollar this week shows it has weakened against several major currencies, particularly the Japanese Yen. The following table illustrates the percentage change in the value of the USD against other currencies:
– EUR: -0.26%
– GBP: -0.64%
– JPY: -1.48%
– CAD: -0.71%
– AUD: -0.83%
– NZD: -0.46%
– CHF: -0.64%
Looking ahead to Friday’s trading session, investors are keenly awaiting the release of the US ISM Manufacturing Purchasing Managers’ Index (PMI) data for April, scheduled for publication at 14:00 GMT. Analysts expect the Manufacturing PMI to report an increase from 52.7 in March to 53.0.
In terms of technical analysis, the AUD/USD pair is currently trading around 0.7200, maintaining a bullish stance as it remains above the 20-day exponential moving average (EMA) at 0.7125. The pair has demonstrated a steady upward trajectory since hitting lows in late December, and the position above this moving average signifies that buyers are in control for the near term. The Relative Strength Index (RSI) is approximately 60, indicating positive momentum without signaling overbought conditions, which suggests that pullbacks could continue to attract buyers.
On the downside, immediate support appears at the 20-day EMA at 0.7125. A decisive break below this level could indicate weakening bullish momentum and potentially expose lower levels beneath 0.7100. However, as long as the AUD/USD maintains its position above this moving average, focus will remain on potential upward movements, with an eye on revisiting multi-year highs around 0.7220. A breakout beyond this level could pave the way for further gains towards 0.7300.
The RBA plays a crucial role in directing Australia’s monetary policy, primarily centered on maintaining a stable inflation rate of 2-3%. Its methods for influencing the economy include adjusting interest rates, which directly impacts the AUD’s strength or weakness. Furthermore, historical trends indicate that higher inflation could lead to increased interest rates, fostering capital inflows from global investors, which in turn bolsters the AUD.
In summary, the Australian Dollar is currently buoyed by market expectations surrounding potential interest rate hikes from the RBA, while the US Dollar faces headwinds from forex interventions. As traders position themselves ahead of key economic data releases, the landscape for both currencies remains dynamic and closely watched.
