Fundamental Forecast for Australian Dollar: Neutral
- AUD/USD Holds 0.9200 Support- Dovish RBA to Trigger Key Reversal
- Australian Dollar Downtrend Intact, We Like Selling
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The long-term outlook for the AUD/USD remains bearish as the pair carves a lower high in April, and the Australian dollar remains at risk of facing a larger decline in the week ahead should the Reserve Bank of Australia (RBA) adopt a more dovish tone for monetary policy.
Even though the RBA is widely expected to keep the benchmark interest rate at 2.50%, the persistent strength in the local currency may undermine the central bank’s upbeat assessment for the $1T economy, and Governor Glenn Stevens may continue to highlight the ongoing slack in private sector activity as the soft 1Q Consumer Price report limits the scope to normalize monetary policy ahead of schedule. With that said, the RBA may take a more aggressive approach in talking down the local currency, but central bank’s verbal intervention may continue to have a limited impact on the exchange rate as the ongoing pickup in market sentiment heightens the appeal of the higher-yielding currency.
As a result, a further pickup in Australia Retail Sales paired with a 9.5K rise in employment may continue fuel expectations of seeing a RBA rate hike sooner rather than later, and a slew of positive developments may keep the AUD/USD afloat should the central bank show a greater willingness to move away from its easing cycle.
In turn, the 0.9200 handle may continue to provide support in the days ahead, and we would need to see a break and a close below this region to favor a bearish outlook for the AUD/USD as the Relative Strength Index preserves the bullish momentum from earlier this year. - DS