A weaker US dollar and falling US Treasury yields are both tailwinds for the AUD/USD.
Hawkish RBA Minutes lifted the AUD/USD despite an existing 50-bps Fed increase.
AUD/USD Forecast: To explore the 0.7500 number and beyond.
The Australian dollar is rising in North American sessions and has reclaimed the 0.7400 figure. This is due to a weaker US Dollar and a risk-on mood as depicted by US earning gains. The AUD/USD trades at 0.7449 as of this writing, up 0.96% from the March 7 swing high, but still below the March 7 swing high.
Market sentiment is positive, which has triggered an interest in commodity-linked currencies. The AUD, CAD and NZD all rose while the greenback is still on the back foot. It’s at 100.362, down 0.62% due to falling US Treasury yields. The benchmark 10-year note falls to 2.849%, a drop of nine basis points.
The AUD/USD reflected the “hawkish tone” of the Reserve Bank of Australia’s (RBA), last meeting minutes. The RBA Board stated that they are more focused on global events. This means higher inflation and other central bank actions. The RBA acknowledged that the timing for the first rate hike had been delayed, citing exceptional evidence regarding inflation and wages.
Fed officials have continued to communicate with each other in the lead up to the April 23 blackout. Monday’s statements by James Bullard, the St. Louis Fed President, continue to resonate in the financial markets. He opened the door to a 75-bps rate increase and stressed that Fed officials want neutral (rates), quickly.
Mary Daly, President of the San Francisco Fed, stated Wednesday that the case to raise the rate by 50bps in May was now closed so that it can announce a reduction in its balance sheet as soon May.
Charles Evan, Chicago Fed President, crossed the wires earlier in the week. Evans stated that the US economy will do well despite rising rates. He also noted that he supports 50-bps increases that could raise rates to the neutral rate of 1.25%-2.50%.
The geopolitical backdrop is that the conflict between Ukraine and Russia continues on various fronts. Russian troops will seize Mariupol, once a port with 400,000 inhabitants. The Kremlin claims that Kyiv is stalling peace negotiations. Meanwhile, Ukraine accuses Moscow for obstructing talks by refusing to accept humanitarian cease-fires.
AUD/USD Forecast: Technical outlook
The AUD/USD rally to 0.7500 could be accelerated by it regaining the 0.7400 level. The prospects for higher AUD/USD prices have increased now that the Relative Strength Index is (RSI) back in bullish territory (53.61).
The AUD/USD’s first resistance would be the middle-parallel Pitchfork line that runs between the top-parallel and central lines. It is located near 0.7500. The latter would be breached, exposing the confluence between October 2021/March 28 cycle highs around the 0.7430-60 region. A test of 0.7600 would follow.
