AUD/USD Nears 2-Week High at 0.6630 Amid US CPI Await

Quick Look:

• AUD trades near a two-week high at 0.6630 against USD amid upcoming US CPI data and FOMC minutes.
• March CPI in the US will rise to 3.4% YoY; Fed rate cuts may appear from September 2024.
• Fed officials offer varied outlooks; Goolsbee warns against high rates, and Powell aims for 2% inflation.
• With a significant jump in new loans, China’s economic recovery may boost Australia’s economy.
• Iron ore price rise supports the AUD/USD by bullish technical indicators, with RSI at 61.36.

The Australian Dollar (AUD) is experiencing modest gains against the US Dollar (USD), trading near a two-week high at 0.6630. This uptick comes ahead of significant economic events, including the release of US Consumer Price Index (CPI) data. Besides, investors are keenly awaiting the Federal Open Market Committee (FOMC) minutes. Those will provide indications of the future direction of interest rates.

US CPI Forecast at 3.4%, Rate Cuts on the Horizon

The focus is on the US economic indicators, with the March CPI estimated to show a year-over-year increase of 3.4%. The core annual inflation rate for March is forecasted to slightly decrease from 3.8% to 3.7%, while the annual inflation rate is expected to rise from 3.2% to 3.4%. These figures are crucial as they could influence the Federal Reserve’s next moves.

Furthermore, interest rate predictions are a hot topic among financial institutions. The Commonwealth Bank anticipates three 25 basis points cuts starting September 2024, echoing sentiments from various Fed officials who stress the importance of aligning interest rates with economic growth and inflation targets. Meanwhile, Minneapolis Fed President Neel Kashkari suggests two rate cuts, and the Reserve Bank of Australia (RBA) maintains its last rate at 4.35%, with the timing of future cuts remaining uncertain.

Fed Divided: Economic Growth vs Inflation Control

Fed officials have expressed differing views on the US economy’s path forward. Austan Goolsbee highlighted a “quite strong” recent jobs report, cautioning against keeping interest rates high for too long due to potential unemployment rate increases. Furthermore, Fed Chair Jerome Powell emphasized the importance of steering inflation back to the Fed’s 2% target, indicating a careful balancing act between fostering economic growth and controlling inflation.

China’s Growth Targets and Loan Boom to Aid AUD

China’s economic indicators, particularly the forecasted significant increase in new loans for March, from 1,450 billion yuan to 3,700 billion yuan. Moreover, a 5% growth target for 2024 signals a potential boost in demand that could positively affect the Australian economy, given its trade ties with China and reliance on commodity exports.

Iron Ore Up 7.37%, Bullish AUD/USD Above EMAs

The AUD’s strength is also supported by a 7.37% increase in iron ore futures this week, reflecting Australia’s commodity-linked economy. Technical analysis shows the AUD/USD pair trading above both the 50-day and 200-day Exponential Moving Averages (EMAs), indicating bullish signals. Resistance levels are identified at 0.66500 and 0.67003, with support levels at 0.66, 0.65760, and the 50-day EMA. The current Relative Strength Index (RSI) stands at 61.36, suggesting that the currency pair has not yet entered overbought territory.

As the global economic landscape evolves, market participants will closely monitor these developments, which could significantly impact AUD and USD trading strategies and broader financial market dynamics.