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The Australian Dollar is trading higher early Tuesday after touching a one-month low the previous session on low post-holiday volume.
The currency is receiving some support from minutes published Tuesday from the Reserve Bank of Australia’s (RBA) April policy meeting, which suggested the central bank was edging closer to raising interest rates for the first time in more than a decade due to accelerating inflation.
At 06:33 GMT, the AUD/USD is trading .7380, up 0.0030 or +0.41%. On Monday, the Invesco CurrencyShares Australian Dollar Trust ETF (FXA) settled at $72.80, down $0.74 or -1.01%.
At its last meeting, the RBA saw core inflation lifting above the bank’s 2-3% target range in the March quarter and more firms were expecting to pass on price rises to consumers. Wage growth was still lagging but likely to pick up as the unemployment rate fell to 4% and below. Due to these developments, the market has priced in June as the start of the RBA’s tightening cycle.
Despite the somewhat hawkish tone from the RBA, the Aussie’s gains are likely to be limited because the Fed is expected to raise rates more aggressively. Furthermore, soaring U.S. Treasury yields and the outlook for a stronger U.S. economy are making the U.S. Dollar a more attractive asset.
Daily Swing Chart Technical Analysis
The main trend is down according to the daily swing chart. A trade through .7343 will signal a resumption of the downtrend. A move through .7661 will change the main trend to up.
The minor trend is also down. A trade through .7494 will change the minor trend to up. This will also shift momentum.
The short-term range is .7165 to .7661. The AUD/USD is currently trading inside its retracement zone at .7413 to .7354.
The long-term retracement zone at .7429 to .7538 is resistance. Combining the two retracement zones makes .7413 – .7429 the key area to watch.
Daily Swing Chart Technical Forecast
The direction of the AUD/USD on Tuesday is likely to be determined by trader reaction to .7354.
Bullish Scenario
A sustained move over .7355 will indicate the presence of buyers. If this move creates enough upside momentum then look for the rally to possibly extend into the pair of 50% levels at .7413 to .7429.
Sellers could come in on the first test of this area, but overcoming .7429 could trigger an acceleration to the upside with .7502 the next key target.
Bearish Scenario
A sustained move under .7354 will signal the presence of sellers. The first target is .7343. Taking out this level will indicate the selling is getting stronger. This could trigger an acceleration to the downside with .7165 the next major target price.