Bullish View
Bearish View
AUD/USD has pulled back from its multi-year peaks as the US dollar regains strength. It is currently at 0.7165, down from this month’s high of 0.7278.
RBA and Federal Reserve Board Minutes
The AUD/USD currency pair was impacted following the Release Bank of Australia’s meeting minutes, where it was decided to raise interest rates for the third time this year.
The central bank expressed concern over rising inflation, which hit 4.6% in March. This resulted in a rate increase to 4.35%. They seem to be straying from their target of 3-4%.
The meeting notes indicated that officials are worried inflation might continue to increase in the coming months, especially with tensions escalating in the U.S.-Iran situation. President Trump has been pushing for a deal with Iran, cautioning that time is limited.
On a brighter note, the Australian economy appears to be on solid ground, currently boasting full employment. Data indicates that the unemployment rate has reached its lowest in years. This hawkish sentiment likely contributes to the recent spike in Australian government bond yields.
The upcoming Federal Reserve minutes on Wednesday will likely influence the AUD/USD movement. These minutes will detail discussions from previous meetings.
Despite this, it’s not anticipated that the minutes will dramatically affect the dollar, as experts think the Fed will keep interest rates stable for the remainder of the year amidst rising inflation.
Recent figures show the composite consumer price index rose to 3.8% in April, with the core CPI at 2.6%. The producer price index also climbed to 6%, marking a peak not seen in years.
AUD/USD Technical Analysis
Examining the daily chart reveals that the AUD/USD pair has retreated over the past few days, dropping from 0.7278 to its current level of 0.7167.
Positively, the pair has created an inverted head-and-shoulders pattern, typically seen as a bullish reversal signal. A Morningstar candlestick formation has also occurred, remaining above the 50-day moving average.
Consequently, it seems likely the pair will continue to climb, targeting the next significant resistance level at 0.7250. However, if it drops below Monday’s low of 0.7117, this would negate the bullish perspective, suggesting more downward movement.
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