The Australian Dollar Outlook

The Australian Dollar has managed to hold its ground despite the recent release of China’s PMI data, which fell short of market expectations. However, there is still potential for the AUD to appreciate due to the hawkish sentiment surrounding the Reserve Bank of Australia (RBA) potentially hiking interest rates. RBA Assistant Governor Sarah Hunter has highlighted inflationary pressures as a key issue, expressing concerns about inflation persistently remaining above the target range of 1%-3%.

In contrast, the US Dollar has rebounded despite lower US Treasury yields ahead of the Core Personal Consumption Expenditures (PCE) data release. Atlanta Fed President Raphael Bostic’s comments about the uncertainty of achieving the 2% inflation target have added to the speculation about the Federal Reserve’s monetary policy stance. Neel Kashkari’s suggestion that a rate hike might still be possible has also contributed to the market’s uncertainty.

Australia’s Private Capital Expenditure exceeded expectations in the first quarter, indicating potential strength in the economy. Additionally, Australia’s Monthly Consumer Price Index rose higher than anticipated, showing signs of inflationary pressures in the economy. These economic indicators could influence the RBA’s decision-making process regarding interest rates in the future.

Technical Analysis of AUD/USD Pair

Looking at the technical analysis of the AUD/USD pair, the daily chart suggests a bullish bias as the pair consolidates within a rising wedge pattern. The 14-day Relative Strength Index (RSI) confirms this bullish bias by staying slightly above the 50 level. The AUD/USD pair could potentially target key resistance levels at 0.6700, 0.6714, and 0.6740. On the downside, immediate support is seen at 0.6600, followed by the 50-day Exponential Moving Average at 0.6588.

Despite the mixed economic data and uncertainties surrounding central bank policies, the Australian Dollar remains resilient. The upcoming developments in China, the US, and Australia will play a crucial role in determining the future direction of the AUD. Traders and investors should closely monitor the economic indicators and technical patterns to navigate the volatility in the currency markets.