Australian Dollar, AUD/USD, US Dollar, Crude Oil, Iron Ore, RBA, Fed - Talking Points
- The Australian Dollar has recovered in line with commodity uplifts
- The RBA remains sidelined, but the Fed has had rates lift off already
- Risk sentiment has improved, lifting AUD. Can anything stop AUD/USD?
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The Australian Dollar has surged higher on the back of positive risk sentiment to start the week. Commodity markets continue to recover from the rout seen at the start of last week.
The underlying fundamentals remain strong for the Aussie, although the RBA are not likely to be making a move on rates anytime soon. The domestic jobs data last week was a solid beat, but the central bank has previously said that they won’t be making a move on rates until they see first quarter CPI, which is due in late April.
Futures markets are pricing about an 80% chance of a hike at the June meeting. The CPI number will be crucial for deliberations at the May meeting. This is in contrast to the US Federal Reserve that started their rate hike cycle last Wednesday.
While the short end continues to favour USD, the 10-year interest rate differential has been moving in favour of AUD.
The iron ore price has been helped by stimulus measures being announced by Chinese authorities as they face burgeoning Covid-19 cases in several large cities.
Looking ahead, the war in Ukraine is likely to continue to impact markets and sways in risk sentiment could boost or hinder AUD/USD accordingly.
AUD/USD, IRON ORE (SGX), CRUDE OIL (WTI), AU-US 10-YEAR
AUD/USD Technical Analysis
The Australian Dollar staged an extraordinary rally to end last week and appears likely to test a descending trend line resistance level.
Just above that is the peak of 0.74412 from a fortnight ago that could offer resistance. The October 2021 high of 0.75560 may also offer resistance.
A bullish Spinning Top Candlestick formation heralded the start of the upswing as the price was unable to close below an ascending trend line.
Support might be at the previous resistance levels of 0.73675 and 0.72454.
The price is now above all the short, medium and long-term simple moving averages (SMA) s which may indicate that bullish momentum is evolving.
The gradient on the longer term 100, 200 and 260-day SMAs is negative, and the price would need to hold these elevated levels in order for them to turn positive. If that were to happen, a further case for bullish momentum could be made.
--- Written by Daniel McCarthy, Strategist for DailyFX.com
To contact Daniel, use the comments section below or @DanMcCathyFX on Twitter
