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Currency Analyst since 2010

AUD/USD: how sustainable is advance?

Elizaveta Belugina

AUD/USD has tested on Tuesday the highest levels since January at 0.7939 reaching the peak even despite the US released better-than-expected inflation figures. Yet the pair failed to close above 0.7900. Does Aussie have strength for higher levels?

The Reserve Bank of Australia has released Financial Stability review today. According to ANZ, although this report won’t prevent a rate cut in Australia, it made clear that RBA’s concerns about the high housing prices have increased. However, for now the majority of economists still expect the RBA to reduce its benchmark rate to 2% in April or May. As the central bank did cut rates in February, then it accepts rate cuts as a policy tool despite the heated housing market. The central bank’s statement that ‘further easing of policy may be appropriate over the period ahead’ adds weight to such scenario. This should continue keeping Aussie under pressure limiting its advance. The next RBA meeting will take place on April 7.

Technically the pair has entered the daily Ichimoku Cloud and returned above the 200-month MA at 0.7796. However, there’s a bearish doji candle on the daily chart. Support is at 0.7750. Analysts at UOB expect AUD/USD to trade this week mostly in the 0.7655/0.7870 range.

Westpac believes that AUD/USD has some bullish potential in the coming weeks because of the weaker US dollar and improved price action in industrial metals. A break of 0.7913 will bring AUD/USD to 0.8000 and then potentially to 0.8300.

 

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