- Improved risk appetite and easier commodity market conditions are helping the risk/commodity sensitive Australian dollar resist recent dollar gains.
- AUD/USD trimmed previous losses and traded back above 0.7100, although still bearish for the day.
- Ahead of next week’s Fed and RBA meetings, bears are targeting yearly lows just below 0.7000.
Increased risk appetite in US equity markets and stabilization in the broader commodity complex are helping the risk- and commodity-sensitive Australian dollar resist recent US dollar gains and it is outperforming stocks such as the euro, pound and yen. The AUD/USD it last traded just above the 0.7100 level, down around 0.3% on the day, having pared previous losses that saw the pair hit its lowest levels since early February at 0.7060.
Currency volatility remains elevated with the US dollar the clear winner and while it improved on Thursday, the overall tone of risk appetite in recent weeks has been subdued as investors worry about weakening growth. world, central bank tightening, geopolitics and China lockdown risks. Regarding growth fears, the US Q1 GDP figures released earlier in the session were not pretty, showing a surprise drop in output, although analysts attributed this to rising imports and a slowdown. in creating inventory.
However, in this context, many AUD/USD bears will continue to point to a test of yearly lows below 0.7000 in the coming weeks. The Fed is likely to raise interest rates by 50bps next week and is likely to signal more 50bp moves ahead and announce tightening plans. Analysts suspect this could easily sustain the USD rally.
But one fact that might make a break below 0.7000 a little harder to pull off is the fact that the RBA could also raise interest rates next week, more than a month earlier than most expect. analysts just a week ago. Wednesday’s 2022 Q1 Australian Consumer Price Inflation Specified figures are the reason for the aggressive shift in policy expectations.
A 15bp rate hike to 0.25% is already fully priced in and rates are expected to end the year at 2.5%, roughly in line with Fed rates. If the RBA falls short of or even beats the aggressive hype, this lessens the case for AUD/USD to head lower in the near term, suggesting that 0.7000 could become a key support area.
Technical levels
Source: Fx Street
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