- The US dollar is revisiting recent highs on a still-aggressive Fed.
- Markets expect US inflation to remain stubbornly high.
- The Australian government assured investors that the economy would not tip into recession.
Today’s AUD/USD price analysis is bearish. The US dollar started to move back toward its multi-year highs from September as investors grew uneasy about rising interest rates and global tensions, pushing the pair lower.
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Bets on anything other than high interest rates through 2023 have all but been shattered by strong US labor market data and expectations that Thursday’s inflation figures will remain stubbornly high. This pushed the dollar back near the 2002 peak achieved last month.
“There are the Fed minutes and US CPI this week that will be quite important for strengthening hawkish Fed expectations and could continue to support the dollar,” said Francesco Pesole, FX strategist at ING
Treasurer Jim Chalmers said on Tuesday that the Australian economy will likely avoid a recession even though the global economy is “a hazardous place right now.” He said the government did not anticipate a decline in Australia’s economy.
Last week, the Reserve Bank of Australia unexpectedly slowed the rate hikes with an increase of 25 basis points, after four outsized moves of 50 bps, on account of the economic strains already present in the domestic economy with households under pressure and businesses struggling with rising costs.
The RBA also warned about growing threats to financial stability that would “be compounded by a considerable tightening in global financial conditions.”
AUD/USD key events today
Investors will be listening to speeches from policymakers, including FOMC members Harker and Mester and RBA assistant governor Ellis. These speeches will likely contain clues on future monetary policy.
AUD/USD technical price analysis: Bullish divergence could mean a rebound to retest 0.6375
The 4-hour chart shows the price trading below the 30-SMA and the RSI below 50, showing the trend is bearish. The price was trading within a range before it broke below the range support at 0.6375. However, this move has shown weakness, as seen in the RSI, which has made a bullish divergence.
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This divergence could mean a pullback to the 0.6375 resistance or a trend reversal. A pullback would bounce off the resistance and head for the next support at 0.6200, while a reversal would break above the resistance and 30-SMA to retest 0.6500.
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Saqib Iqbal
