The Australian Dollar (AUD) showed signs of recovery on Tuesday, reclaiming ground lost in the previous session. However, it faced resistance against the US Dollar (USD) as surging US Treasury bond yields, fueled by positive ISM Manufacturing PMI data, weighed on the AUD/USD pair. Meanwhile, minutes from the Reserve Bank of Australia‘s (RBA) March meeting revealed a commitment to maintaining current interest rates amid inflationary pressures and a tight labor market.
The RBA’s decision to hold rates steady until at least November reflects concerns over inflation rates surpassing those of other nations and the persistent strength of the job market. Despite ongoing inflation fluctuations, experts anticipate the RBA may delay implementing monetary easing measures until 2025.
In contrast, the US Dollar Index (DXY) continued its upward trajectory for the fifth consecutive session, driven by diminishing expectations of a quarter-point interest rate cut by the Federal Reserve in June. Federal Reserve Chairman Jerome Powell’s remarks further supported the dollar’s ascent, as he affirmed the Fed‘s stance on interest rates in light of recent inflation data.
Market indicators revealed mixed signals for the Australian economy. While TD Securities Inflation and Melbourne Institute’s Monthly Inflation Gauge fluctuated marginally, ANZ Job Advertisements experienced a decline in March. The RBA’s minutes underscored the board’s cautious approach towards monetary policy, acknowledging the uncertainty of the economic outlook and the challenges in achieving target inflation levels.
Looking at global economic trends, China’s manufacturing sector exhibited resilience, with both Caixin Manufacturing PMI and NBS Manufacturing PMI surpassing expectations in March. Additionally, US ISM Manufacturing PMI indicated unexpected expansion, buoyed by rising prices paid in the sector.
Technically, the Australian Dollar faces a critical juncture, trading near 0.6490 against the US Dollar. Immediate support lies at 0.6477, with further downside potential towards the psychological level of 0.6450. Conversely, a breach above 0.6500 could propel the AUD/USD pair towards resistance levels at 0.6528 and 0.6550.
In summary, while the Australian Dollar strives for recovery, it grapples with headwinds from robust US economic data and uncertainties surrounding monetary policy decisions, highlighting the delicate balance in currency markets.
