AUD/USD declines heading towards 0.7440

• The Australian dollar remains on the defensive.
• Prices paid by producers in the US rose to a 12-year high, above the 11% threshold.

After hitting a daily high near the 0.7500 mark, the Australian dollar is slipping but clinging to the March 7 high around 0.7441 amid a positive market mood, as US stocks show. Meanwhile, in the FX space, the antipodes are the session laggards; despite that, the RBNZ surprisingly raised the overnight cash rate (OCR) by 50bps, which also boosted the Australian dollar outlook. In the American session, the AUD/USD is trading at 0.7444.

AUD bulls remain defensive despite weaker US dollar

US stocks remain in positive territory, while falling US Treasury yields weighed on the dollar. The US 10-year yield is plummeting, from 2,788% to 2,685%, a drop of ten basis points, a dollar headwind, as shown by the US Dollar Index, down 0.29 %, standing at 99,928, below the 100,000 mark. Despite the above, AUD bulls were unable to capitalize on the softer tone in the dollar, despite the appetite for riskier assets.

The US economic index presented the producer price index (PPI) for March on Wednesday. The reading came in at 11.4% year-on-year, much higher than expected, the most significant increase since 2010, emphasizing that inflation is tighter than initially expected as producers prepare to pass costs on to customers. In turn, the so-called core CPI for the same period, which excludes volatile items such as food and energy, expanded by 9.2% year-on-year, higher than the 8.8% expected, in contrast to the latest core CPI report, which showed that core inflation to the consumer could be close to peaking.

Elsewhere, the Russo-Ukrainian conflict continues. Ukrainian forces stated that Russian troops were preparing to attack the Donetsk and Kherson regions. The Kremlin added that it would consider US and NATO vehicles carrying weapons on Ukrainian territory legitimate military targets. As for the peace talks, a spokesman for the Russian Foreign Ministry said they continue online.

AUD/USD Price Forecast: Technical Outlook

AUD/USD bias remains higher. The price action of the past three days is further supportive of the above, but its drop in RBNZ policy decisions is courtesy of AUD weakness, rather than a strong dollar. However, it is worth noting that the pair rose from daily lows around 0.7391 towards current levels, but below the parallel line of Pitchfork midline around 0.7470-80 range. That being said, AUD/USD’s first resistance would be the first, followed by the psychological figure at 0.7500. Once cleared, the next resistance would be the 0.7540-55 area, the confluence of the cycle highs of March 28 and October 2021, followed by the 0.7600 mark.

Later in the day, the Australian economic docket will present Consumer Inflation Expectations and will report the employment change along with the unemployment rate.

Technical levels