AUD/USD Outlook
AUD/USD extends the advance from the monthly low (0.6620) as the update to the US Consumer Price Index (CPI) generates a bearish reaction in the Greenback, and data prints coming out of Australia may fuel the recent rebound in the exchange rate as employment is expected to increase for the second month.
AUD/USD forecast: Death Cross formation pending
AUD/USD negated the odds for a bear flag formation as it climbed above the 200-Day SMA (0.6745) earlier this month, and the exchange rate may continue to retrace the decline from the monthly high (0.6794) as it snaps the series of lower highs and lows carried over from last week.
Register here for the next Live Economic Coverage event with David Song
At the same time, the update to Australia’s Employment report may prop up AUD/USD as the economy is projected to add 20.0K jobs in March, and evidence of a tight labor market may push on the Reserve Bank of Australia (RBA) to implement higher interest rates as ‘the Board expects that some further tightening of monetary policy may well be needed to ensure that inflation returns to target.’
In turn, the RBA may take additional steps to combat inflation as ‘wages growth is continuing to increase in response to the tight labour market,’ and Governor Philip Lowe and Co. may continue to vote for a hawkish hold at its next meeting on May 2 as ‘the Board’s priority is to return inflation to target.’
Until then, AUD/USD may trade within a defined range as it continues to hold above the March low (0.6565), and it remains to be seen if the exchange rate will respond to the negative slope in the 200-Day SMA (0.6745) as it appears to be on track to push back above the moving average.
With that said, another rise in Australia Employment may fuel the recent rebound in AUD/USD as it puts pressure on the RBA to implement higher interest rates, but the negative slope in both the 50-Day SMA (0.6759) and 200-Day SMA (0.6745) may present a ‘death-cross’ formation in the exchange rate as the moving averages look poised for a crossover.
Australian Dollar Price Chart – AUD/USD Daily
Chart Prepared by David Song, Strategist; AUD/USD on TradingView
- AUD/USD holds above the March low (0.6565) as it snaps to the series of lower highs and lows carried over from last week, with the exchange rate moving back towards the 200-Day SMA (0.6745) as it reverses ahead of the 0.6600 (23.6% Fibonacci retracement) handle.
- A move above the long-term moving average may AUD/USD towards the monthly high (0.6794), with a break/close above the 0.6780 (38.2% Fibonacci retracement) to 0.6820 (23.6% Fibonacci retracement) region opening up the 0.6870 (38.2% Fibonacci retracement) area.
- However, a ‘death-cross’ formation may materialize as the 50-Day SMA (0.6759) approaches the 200-Day SMA (0.6745), with both moving averages now reflecting a negative slope.
- Failure to push back above the long-term moving average may keep AUD/USD within the March range, with a move below 0.6660 (50% Fibonacci retracement) bringing the 0.6600 (23.6% Fibonacci retracement) handle back on the radar.
Additional Resources
USD/CAD forecast: Canadian dollar vulnerable to wait-and-see BoC
--- Written by David Song, Strategist
