Daily Price Outlook
The AUD/USD is trading at 0.6723, up by 0.35% in 24 hours. The currency pair shows positive momentum as hawkish RBA Minutes combined with positive China Q1 GDP supported the Aussie.
Analyzing Key Takeaways from the Reserve Bank of Australia's (RBA) Latest Meeting Minutes
On Tuesday, the Reserve Bank of Australia released the policy meeting minutes from April 4. According to the minutes, the RBA may continue to tighten monetary policy despite a break in April. However, the decision will mostly rely on the inflation data and the economy.
The minutes showed that the nine board members considered the case for an additional 25 basis-point increase. After that, the cash rate would have increased to 3.85%, marking the 11th straight rate increase.
According to the minutes, traditional reasons favoring raising interest rates included the fact that the employment market was extremely tight and that inflation, which in February was running at an annual rate of 6.8%, was still too high.
Philip Lowe, the governor of the RBA, also emphasized that the halt does not mean the rises are over and that it might tighten much more if inflation and consumer demand continue to rise.
According to the most recent RBA Monetary Policy Meeting Minutes, the board debated raising interest rates at its April meeting before deciding to put it on hold. It favored the AUD/USD pair.
Assessing the Progress of China's Economic Recovery Post-Pandemic
China's economy expanded more quickly than anticipated in the first quarter as businesses and customers received relief from the catastrophic consequences of the pandemic by lifting COVID limitations.
On Tuesday, the National Bureau of Statistics said that the first quarter (Q1) of 2023 saw a 4.5% YoY growth in China's gross domestic product (GDP). Additionally, March saw a 10.9% YoY increase in retail sales, surpassing expectations of 7.4% and 3.5%, respectively.
It is noteworthy that Australia is China's top trading partner. As a result, stronger Chinese GDP figures strengthened the Australian Dollar and helped the AUD/USD surge.
Anticipating a Hawkish Stance from the Federal Reserve: Implications and Market Reactions
Meanwhile, Monday's favorable US data followed Friday's strong consumer-centric numbers, boosting the market's expectations of a 0.25% Fed rate rise in May. The NY Empire State Manufacturing Index increased to 10.8 for April on Monday, reversing a four-month slump and reaching its highest level since July of the previous year.
The US economy's resilience raised concerns about the Fed raising interest rates.
Additionally, Fed Fund futures prices show that the market is anticipating a probability of over 85% that the Fed will raise rates by 25 basis points (bps) in May. Although the mainstream still favors a Fed pause, expectations for a 25 bps hike in June have increased.
The possibility of another Fed hike in interest rates increased, pushing the US dollar slightly higher to over 102.00. Hawkish Fed bets supported the US Dollar and capped AUD/USD gains.
Daily Technical Levels
Pivot Point: 0.6700
AUD/USD – Technical Outlook
The AUD/USD pair remains below the previously breached support level of the bullish channel depicted on the chart, maintaining the bearish trend scenario. The initial target of this trend is the 0.6665 level, and exceeding this level could lead the price toward 0.6550 as the subsequent negative target.
As such, we maintain our bearish outlook for the near term, with the caveat that a breach of the 0.6720 level would prompt the price to test the 0.6780 level directly before the next clear direction can be determined. For today's trading, the anticipated range lies between 0.6640 as support and 0.6750 as resistance.
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