The Australian Dollar (AUD) has sustained its upward trajectory, reaching a three-week high of 0.6560 on Monday, bolstered by growing hawkish sentiment surrounding the Reserve Bank of Australia (RBA). This surge in the AUD’s value follows last week’s release of CPI inflation data, which surpassed expectations and fueled speculation of potential interest rate hikes by the RBA.
Warren Hogan, chief economic adviser at Judo Bank, has forecasted the possibility of three cash rate hikes by the RBA throughout 2024, with an eventual target rate of 5.1%, potentially commencing as early as August. Investors are keenly awaiting the release of March Retail Sales data on Tuesday, seeking insights into consumer spending patterns that significantly influence inflation and GDP trends in Australia.
In contrast, the US Dollar Index (DXY), tracking the USD against major currencies, retraced recent gains, indicative of a shift towards risk-on sentiment in the market. Despite this, analysts anticipate the US Federal Reserve (Fed) to maintain its current interest rate range of 5.25%–5.5% in the upcoming announcement on Wednesday, citing concerns over elevated inflation levels. The likelihood of unchanged interest rates in the June meeting has increased to 87.7%, according to the CME FedWatch Tool.
Friday’s release of the annual US Core Personal Consumption Expenditures (PCE) Price Index data for March showed a modest increase, bolstering speculation that the Fed may delay potential rate adjustments until September.
In market movements, Monday witnessed a robust surge in Australia’s stock market, propelled by a bullish performance on Wall Street. The ASX 200 Index extended gains across all sectors following positive momentum from tech giants’ earnings reports.
Technical analysis indicates the AUD/USD pair maintaining its position around 0.6560, within a symmetrical triangle formation. With the 14-day Relative Strength Index (RSI) signaling bullish momentum, potential upward targets include the psychological barrier at 0.6600 and the upper boundary of the triangle at 0.6639. Conversely, immediate support is expected at 0.6500, with further downside potential towards 0.6443 and April’s low of 0.6362 in case of a breach.
In summary, the AUD continues to exhibit strength amidst RBA optimism, while the USD’s reversal and market dynamics contribute to ongoing volatility in currency markets.
