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Market Analysis – USDAUD

There is a specific reason why the AUDUSD has been selected as part of our analysis today, it is one of the few currency pairs on Tuesday which saw one currency increase against the whole market, while the other decreased against the whole market, and therefore there was little hesitation in the movement. Today the Australian Dollar is increasing against the US Dollar in an attempt to correct and regain yesterday’s lost value. The instrument increases by approximately 18 pips, but still remains in the lower part of yesterday’s price range. 

When looking at the Australian Dollar yesterday we could see the currency weakened against its main competitors including the Pound, Yen, and Euro. When looking at the US Dollar, both today and the day before we can see the currency is strengthening against some of its main competitors such as the Euro, the Pound, and the Japanese Yen. Looking at the US Dollar index, we can see the currency is attempting to push to a new two week high.

Investors are still focused on the comments of the US Federal Reserve officials. The regulator’s head, Jerome Powell, said that the economic recovery is progressing “at a positive pace”, but it will take time to achieve pre-crisis indicators. This rhetoric was supported by the Head of the New York FRB, John Williams. In addition, the President of the Richmond FRB, Thomas Barkin, said that he expects inflationary pressures to rise this year, but that it will decrease significantly next year. Generally, Barkin’s comment confirms the thesis of the regulator’s members, repeatedly stated earlier, that a surge in inflation after the launch of large-scale programs to support the American economy is quite likely, but it will be short-term and will not become the basis for a change in monetary policy.

That being said, Treasury Secretary, Janet Yellen, took a completely different stance. Ms. Yellen did not rule out the possibility of an early rate hike in order to avoid overheating the American economy, which is demonstrating impressive growth rates. Investors are also optimistic about news of the gradual reopening of the US states against the backdrop of an active vaccination campaign and a general stabilization of the epidemiological situation.

Investors are also still focused on the meeting of the Reserve Bank of Australia, which took place the day before. The regulator expectedly left the interest rate at 0.10% and did not adjust the monetary policy. Moreover, officials were extremely dovish and have pledged to maintain it for a long period, even if the Australian economy grows faster than expected. These comments dampened sentiment amongst investors which may be looking for higher interest rates in order to obtain more attractive yields. Most likely, interest rates will not change until 2024. The regulator’s head, Philip Lowe, also said that the RBA will consider the volume of future asset purchases at a July meeting, after the completion of the second round of the quantitative easing program. These are methods in which the Central Bank can further increase supply of Dollar within the economy and banking system.

However, the good news regarding yesterday’s conference is the governor has advised the economy continues to do better than originally expected and is forecast to continue. This recovery is especially evident in the strong growth in employment, with the unemployment rate falling further to 5.6% in March, and the number of people with a job now exceeds the pre-pandemic level. It is expected that the unemployment rate is likely to continue to decrease to 5% by the end of this year. The Reserve Bank has also increased the prediction for the region’s Gross Domestic Product for this year and next year. 

Resistance Levels: 0.8007, 0.7852, 0.78188

Support Levels: 0.76951, 0.7674, 0.7584

 

 

Disclaimer: This material is considered a marketing communication and does not contain, and should not be construed as containing investing advice or a recommendation, or an offer of or solicitation for any transactions in financial instruments or a guarantee or a prediction of future performance. Past performance is not a guarantee of or prediction of future performance.
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