Australian dollar (6A)

Australian Dollar (6A) Attempting to Recover Ahead of Fed and RBA

  • The AUD/USD is hovering around the lowest levels since February, having recently pulled back from a daily low.
  • The risk profile remains weak as traders prepare for a pivotal week.
  • Australian Purchasing Managers’ Indices were better, but worries about China and news out of Russia weighed on prices.
  • The RBA’s hawks have less ammunition than the Fed’s bulls, suggesting further decline for the Australian dollar despite the expected rate hike.

In the first hour of the European session on Monday, the Australian dollar (6A) falls to its lowest intraday level since February. With that in mind, the Aussie is licking its wounds amid a 3-day downtrend around 0.7060 at press time.

As European traders jump off their tables and the US dollar pulls back from intraday highs, the Aussie may experience a recovery. However, the dollar index (DXY) declined as US Treasury yields rose 5.7 basis points (bps) to 2.942%.

Despite this, market sentiment remains unsatisfactory, with the DAX and Eurostoxx 50 both reporting losses at the time of writing.

Germany’s dismal retail sales confirm fears that the Russian-Ukrainian crisis is causing economic weakness. On the risk barometer of the Australian dollar (6A), geopolitical worries are compounded by the Chinese lockdown on Coronavirus and reduced activity in April.

This implies that the recent rebound remains elusive and could be reversed if traders are disappointed by today’s ISM US Manufacturing PMIs, which are expected to rise from 57.1 to 58.0 today. Meanwhile, a bullish Australian PMI report released earlier this morning by Markit and AiG is overshadowed by NBS activity over the weekend in China.

Australian dollar prices have gained momentum ahead of Tuesday’s Reserve Bank of Australia (RBA) policy meeting. Policymakers have switched to hike signals suggesting a 0.15% hike in the benchmark interest rate. However, the Australian dollar (6A) may not be able to support RBA gains as the Fed expands its role in fighting inflation with a 0.50% rate hike and signs of balance sheet normalization.

Australian dollar (6A) technical analysis:

Australian dollar (6A) 4-hour chart

The 4-hour chart shows a dismal scenario as the price remains below the 20-period SMA (green line). Moreover, the resistance zone around 0.7184-0.7195 keeps the prices under pressure. Contrarily, if the price manages to break the resistance zone, it may head up towards 50-period SMA (yellow line) around 0.7225.