The AUD/USD experienced a decline of 0.49% on Tuesday, reversing the previous day’s gain. The Australian dollar ended the session at $0.66867 after reaching a high of $0.67345 and then falling to a low of $0.66770. Investors are now turning their attention to upcoming economic indicators, including the Australian Monthly CPI Indicator and US mortgage rates. These factors could have a significant impact on the currency pair and provide insights into future monetary policy decisions.
Investors are closely watching the Australian Monthly CPI Indicator, set to be released on Wednesday. If retail sales figures for November surpass expectations, it could lead to demand-driven inflation. In response, the Reserve Bank of Australia (RBA) may consider raising interest rates to control excessive spending. However, a more hawkish rate path could increase borrowing costs and reduce disposable income, resulting in decreased consumer spending and dampened demand-driven inflation.
US mortgage rates are another crucial factor to monitor. Downward trends in mortgage rates can contribute to an upward trend in disposable income. Higher disposable income can stimulate consumer spending and demand-driven inflation. Conversely, a decline in disposable income could curb spending and dampen inflationary pressures.
According to Freddie Mac, US 30-year mortgage rates were at 6.62% in January, with a peak of 7.79% in October. A continued downward trend in mortgage rates could provide support for higher disposable income and, subsequently, increased consumer spending and demand-driven inflation.
Investors should also pay attention to commentary from members of the Federal Open Market Committee (FOMC), particularly Fed Vice Chair John Williams, scheduled to speak on Wednesday. Any references to the US Jobs Report and interest rates will provide valuable insights into potential monetary policy decisions.
Near-term trends for the AUD/USD will largely depend on Australian and US inflation numbers. Should Australian inflation remain robust while US inflation figures soften, monetary policy divergence may favor the Australian dollar. Notably, the AUD/USD has remained above the 50-day and 200-day Exponential Moving Averages (EMAs), signaling a bullish trend. A breakout above the $0.67286 resistance level could drive the currency pair’s value towards the $0.68096 resistance level.
On the other hand, a decline below the $0.66500 handle would bring the 50-day EMA and the $0.66162 support level into play. A 14-period Daily Relative Strength Index (RSI) reading of 47.88 suggests a potential fall to the $0.66162 support level before entering oversold territory (typically above 70 on the RSI scale).
Bearish Short-Term Outlook but Bullish Long-Term Signals
The AUD/USD currently remains below the 50-day EMA while staying above the 200-day EMA, indicating a bearish short-term outlook but bullish long-term signals. A break above the $0.67286 resistance level and the 50-day EMA could bolster the currency pair and potentially lead to a move towards the $0.68096 resistance level. However, selling pressure may intensify around the $0.67286 resistance level, as it coincides with the 50-day EMA.
Alternatively, a drop below the 200-day EMA would provide an opportunity for bears to push the AUD/USD towards the $0.66162 support level.
As investors eagerly await the release of key economic indicators, including the Australian Monthly CPI Indicator and US mortgage rates, the AUD/USD continues to experience fluctuations. Various factors such as inflationary pressures, monetary policy divergence, and support and resistance levels will shape the currency pair’s short-term and long-term outlook. Traders should closely follow these developments to make informed decisions regarding their AUD/USD positions.
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