AUD/USD Forecast and News
AUD/USD steadies despite rising US inflation, traders eye Aussie WPI
The Australian Dollar registered gains against the US Dollar on Tuesday, even though inflation in the United States edged, spurring hawkish remarks by Fed Chair Jerome Powell. The AUD/USD trades near 0.6624, virtually unchanged as Wednesday’s Asian session commences.
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AUD/USD Technical Overview
Extra gains may cause the AUD/USD to revisit its May high of 0.6647 (May 3), which precedes the March top of 0.6667 (March 8) and the December 2023 peak of 0.6871.
Meanwhile, if bears gain control, there is some brief resistance at the 100-day and 55-day SMAs of 0.6570 and 0.6541, respectively, before the more important 200-day SMA of 0.6520, all before plunging to the May low of 0.6465 and the 2024 bottom of 0.6362 (April 19).
Looking at the larger picture, further gains appear on the table as long as spot trades above the 200-day SMA.
On the four-hour chart, buying momentum looks to be regaining traction. However, early resistance develops at 0.6647 before 0.6667. On the downside, 0.6585 is an immediate support level, ahead of 0.6557 and the 100-SMA at 0.6531. The RSI rose to the vicinity of 60.
Fundamental Overview
Persevering downward pressure on the US Dollar (USD) bolstered the recovery in risk-associated assets, driving AUD/USD to reclaim levels above 0.6600 on Tuesday.
Meanwhile, the USD added to Monday’s spur sentiment, as caution mounted ahead of the forthcoming release of US inflation data tracked by the Consumer Price Index (CPI) on Wednesday. Moreover, diminishing US yields contributed to the corrective decline in the Greenback, against the backdrop of an economic landscape aligned with the anticipated initiation of the Fed's easing programme, likely to commence around September.
Also bolstering the dollar’s downward path, Chief Jerome Powell ruled out a rate hike at an event in Amsterdam, adding that he expects inflation to maintain its downtrend this year.
Turning to domestic factors, an additional uptick in copper prices and a modest rise in iron ore prices further bolstered the positive momentum surrounding the Australian dollar on Tuesday.
In terms of monetary policy, the Reserve Bank of Australia (RBA) opted to maintain its interest rate at 4.35% during its May 7 meeting. Additionally, the bank reaffirmed its neutral policy stance, signalling flexibility in its approach. Furthermore, the RBA updated its economic projections, foreseeing heightened inflation rates until Q2 2025, primarily attributed to ongoing service price inflation. Nevertheless, the bank anticipates inflation to converge back to the target range of 2%–3% by the latter part of 2025, reaching the midpoint by 2026.
During the subsequent press briefing, Governor Michele Bullock maintained a balanced perspective. Regarding interest rates, she hinted at the board's contemplation of potential rate adjustments at the current meeting, stating, "we might have to raise, we might not."
At present, the swaps market has largely discounted the probability of further rate hikes in the next six months, with an anticipated decline in the subsequent six months.
Moreover, both the RBA and the Federal Reserve are anticipated to implement their easing measures later than many of their other G10 counterparts.
Considering the Fed's commitment to monetary policy tightening and the potential for RBA easing later in the year, sustained upward movements in AUD/USD are expected to encounter limitations.
SPECIAL WEEKLY FORECAST
Interested in weekly AUD/USD forecasts? Our experts make weekly updates forecasting the next possible moves of the Australian Dollar-US Dollar pair. Here you can find the most recent forecast by our market experts:
AUD/USD: Interim top confirmed, 0.7000 at risk Premium
The AUD/USD pair kept falling in the last few days, reaching a fresh multi-week low of 0.7263 on Friday, to close the trading week a handful of pips above it.
AUD/USD Big Picture
AUD/USD Bullish Themes
AUD/USD Bearish Themes
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Editors' picks
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AUD/USD YEARLY FORECAST
How could AUD/USD move this year? Our experts make an AUD/USD update forecasting the possible moves of the Aussie-US Dollar pair during the whole year. Don't miss our 2024 AUD/USD forecast!
AUD/USD FORECAST 2024
The Australian Dollar (AUD) started 2023 on a high note, though slumped closer to its post-pandemic low against the USD during the latter part of the year. The currency clawed back some of its steep declines during the final two months of 2023, and the outlook seems sunnier in the wake of the prevalent bearish sentiment surrounding the Greenback. Read more details about the forecast.
MOST INFLUENTIAL POLITICAL EVENTS IN 2024 FOR AUD/USD
Will the Fed will achieve a soft landing? The current market pricing for a more aggressive policy easing by the central bank next year might have already set the stage for a disappointment and favours the USD bulls. This should allow the USD to resume the prior uptrend witnessed since July 2023 and keep a lid on a runaway rally for the AUD/USD pair.
The upcoming US Presidential election could also play a key role in influencing the USD price dynamics and driving the aussie.
About AUD/USD
AUD/USD, The 'Aussie'
The AUD/USD pair, also called the “Aussie”, tells the trader how many US dollars (the quote currency) are needed to purchase one Australian dollar (the base currency). This currency pair is also known as the "Aussie". Together with the New Zealand Dollar and the Canadian Dollar, the AUD is a commodity currency, that is a currency whose country's exports are largely comprised of raw materials (precious metals, oil, agriculture, etc.).
The interest rates set by the Reserve Bank of Australia (RBA) have been among the highest of industrialized countries and the relatively high liquidity of the AUD has made it an attractive tool for carry traders looking for a currency with the highest yields. These factors made the AUD very popular among currency traders.
AUD/USD CORRELATIONS
Australia is a big exporter to China and its economy and currency reflect any change in the situation in that country. The prevailing view is that the Australian Dollar offers diversification benefits in a portfolio containing the major world currencies because of its greater exposure to Asian economies.
This correlation with the Shanghai stock exchange is to be added to the correlation it has with gold. The pair AUD/USD often rises and falls along with the price of gold. In the financial world, gold is viewed as a safe haven against inflation and it is one of the most traded commodities.
ORGANIZATIONS, PEOPLE AND ECONOMIC DATA THAT INFLUENCE AUD/USD
The AUD/USD news can be seriously affected by the decisions taken by these organizations and people:
- Reserve Bank of Australia (RBA) that issues statements and decides on the interest rates of the country. Its president is Michele Bullock.
- Australian Government and its Department of Finance that implement policies that affect the economy of the country.
- The US Government: events as administration statements, new laws and regulations or fiscal policy can increase or decrease the value of the US Dollar and the currencies traded against it, in this case, the Australian Dollar.
- Fed, the Federal Reserve of the United States whose president is Jerome Powell. The Fed controls the monetary policy, through active duties such as managing interest rates, setting the reserve requirement, and acting as a lender of last resort to the banking sector during times of bank insolvency or financial crisis.
In terms of economic data, as for most currencies, the AUDUSD traders have to keep an eye on:
- GDP (Gross Domestic Product), the total market value of all final goods and services produced in a country. It is a gross measure of market activity because it indicates the pace at which a country's economy is growing or decreasing. Generally speaking, a high reading or a better than expected number is seen as positive for the AUD, while a low reading is negative.
- Inflation measured by key indicators as the CPI (Core Price Index) and the PPI (Production Price Index), which reflect changes in purchasing trends.
- Current Trade Balance, a balance between exports and imports of total goods and services. A positive value shows trade surplus, while a negative value shows trade deficit. If a steady demand in exchange for AUD exports is seen, that would turn into a positive growth in the trade balance, and that should be positive for the AUD.
Michele Bullock
Michele Bullock is an Australian economist who is currently governor of the Reserve Bank of Australia. She commenced as governor on 18 September 2023, and is the first woman to hold the role. She is Chair of the Reserve Bank Board, Payments System Board and Council of Financial Regulators. Prior to her current role, Ms Bullock was the Deputy Governor of the Reserve Bank of Australia.
Michele Bullock RBA's Profile and Wikipedia
Jerome Powell
Jerome Powell took office as chairman of the Board of Governors of the Federal Reserve System in February 2018, for a four-year term ending in February 2022. His term as a member of the Board of Governors will expire January 31, 2028. Born in Washington D.C., he received a bachelor’s degree in politics from Princeton University in 1975 and earned a law degree from Georgetown University in 1979. Powell served as an assistant secretary and as undersecretary of the Treasury under President George H.W. Bush. He also worked as a lawyer and investment banker in New York City. From 1997 through 2005, Powell was a partner at The Carlyle Group.
Jerome Powell Fed's Profile and Wikipedia
RBA NEWS & ANALYSIS
FED NEWS & ANALYSIS
ASSETS THAT INFLUENCE AUD/USD THE MOST
- Currencies: NZD and JPY (New Zealand and Japan are important regional partners of Australia). Other important group of influent pairs includes: EUR/USD, GBP/USD, USD/JPY, USD/CHF, NZD/USD and USD/CAD.
- Commodities: The most important is Gold, as already explained above, but also Iron Ore and Natural Gas.
- Bonds: GACGB10 (Australian Government Bonds Generic Yield 10 Year), GNZGB10 (New Zealand Government Bond 10 Year) and T-NOTE 10Y (10 year US Treasury note).
- Indices: S&P/ASX 200 (stocks of the Australian Securities Exchange), S&P/TSX Global Gold Index (includes producers of gold and related products at the Toronto Stock Exchange).