Sat, June 15, 2024

AUD/USD Hits 4-Month High, Faces 0.6750 Resistance

Wibest – Australian Money: Australian dollar bills. AUD

Quick Look:

  • The Australian Dollar (AUD) has reached a four-month high against the US Dollar (USD).
  • On Tuesday, these minutes could offer insights into future policy. However, rates may remain at 4.35% this year.
  • Softer CPI and NFP data from the US increase Fed rate cut speculations. Lower Australian wage data affects RBA rate cut expectations.

The AUD/USD pair is currently hovering around the quarterly open on the daily chart. The significant resistance near the 0.6750 level poses a challenge for bullish traders. The pair is in an uptrend in the hourly chart. Besides, 100 Exponential Moving Averages (EMAs) remain in a bullish sequence. A potential pullback to the 0.6650 area could stimulate buying interest, while a break below 0.6630 might suggest a deeper retracement.

PBoC LPR Decision Could Boost AUD Demand

On Monday, the People’s Bank of China (PBoC) will announce the 1-year and 5-year Loan Prime Rates (LPR). An unexpected LPR cut could boost demand for the Aussie dollar, given China’s significant role in Australian exports. Improved demand from China could positively affect the Australian economy and labour market.

Investors are keenly observing RBA commentary following recent labour market data, which indicated increased unemployment and slower wage growth. FOMC member speeches on Monday will capture investor attention, especially after recent hawkish remarks about maintaining higher interest rates. Investor bets on September’s upcoming inflation and retail sales data may shape the Fed rate cut.

RBA Minutes Expected, Rates Likely Steady at 4.35%

Market analysts anticipate the Reserve Bank of Australia’s (RBA) minutes, scheduled for release on Tuesday, as a focal point. Although analysts do not expect these minutes to introduce groundbreaking information, they may reveal subtle insights into the RBA’s future policy direction. Despite the possibility of a rate hike should inflation rise, the prevailing market sentiment suggests that the rates will remain at 4.35% for the rest of the year.

US CPI, NFP Data May Prompt Fed Rate Cut Speculation

Softer Consumer Price Index (CPI) and Non-Farm Payroll (NFP) data from the United States have increased speculation about a potential Federal Reserve rate cut. In Australia, lower wage data influences money market expectations, maintaining a slim chance of an RBA rate cut.

CPI reports from the UK and Canada will be closely monitored, as easing consumer prices in these regions could support a faster decline in domestic prices. Meanwhile, the Reserve Bank of New Zealand (RBNZ) is expected to maintain its current monetary policy stance on Wednesday. Market participants will be particularly attentive to any revisions in the quarterly forecasts for inflation and the Official Cash Rate (OCR).

PMIs to Indicate Inflation Trends; Fed Chair Speaks Monday

Flash Purchasing Managers’ Indexes (PMIs) for Australia will provide valuable insights into inflationary pressures and economic growth trends. Additionally, sentiment derived from PMIs in Australia and Japan may offer predictive signals for similar reports from the UK, Europe, and the US.

Federal Reserve Chairman Jerome Powell is set to speak on Monday, followed by the release of the Federal Open Market Committee (FOMC) minutes on Thursday. Although these minutes might be outdated due to recent softer NFP and CPI data, the University of Michigan’s consumer sentiment report on inflation expectations will be crucial for USD sentiment.

There has been an increase in net-short exposure to AUD/USD futures among asset managers and speculators, likely influenced by weaker wage data and higher unemployment rates in Australia.

AUD/USD Trends Hinge on PBoC, RBA, and Fed Outcomes

The near-term trends in the AUD/USD pair will depend on outcomes from the PBoC, RBA commentary, and FOMC discussions. An unexpected LPR cut by the PBoC may not immediately shift the sentiment on the RBA’s rate path, while hawkish Fed rhetoric could dampen expectations for a September rate cut.

On the daily chart, the AUD/USD pair is trading above the 50-day and 200-day EMAs, indicating a bullish trend. A break above $0.67003 could pave the way to $0.67500, with a further breakout targeting the $0.67967 resistance. Conversely, a drop below $0.66500 might target the $0.65760 support level. The 14-period Daily RSI at 64.59 suggests there is room for the pair to move to $0.67500 before becoming overbought.

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