The AUDUSD is currently trading at a critical zone as investors continue to digest macro-factors at play globally. The AUDUSD has been suffering selling pressure as dollar strength surged on the hawkish fed. Investors are pricing in a more aggressive monetary tightening by the Fed with an increasing chance for a 50bps rate hike at the May meeting.
The inflationary worries in the US have pushed Treasury yields higher as the Fed’s tone turns more hawkish weighing down the AUDUSD pair. The Reserve Bank of Australia is set to hike interest rates later this year lagging behind other global central banks hence leaving a cloud of dovishness in the near term.
The Shanghai lockdown has also slowed demand for Australian exports as Chinese industries have their tools down on surging Covid-19 cases. The Chinese imports dropped from 15% YoY to -0.1% in March and continue to underpin Australian dollar demand in the near term.
The negative employment data from Australia for March remains a key factor indicating slowing economic growth. A rise in interest rates by the Reserve Bank of Australia before its projected timeframe may boost the AUDUSD pair amidst soaring inflation.
The AUDUSD remains bullish in the intermediate-term as surging raw materials prices boost the commodity-backed currency. Commodities do well in inflationary times and a boom in countries that produce them.
The war in Ukraine is a key element that will continue to boost commodity prices as global markets are hit with a supply squeeze. The war cloud is still far from over and peace talks have been futile hence the uncertainty it brings to the market causes higher commodity demand.
The pair is currently trading at 0.7350 near-term support and a break below that area will renew sellers’ interest in the 0.7300 area. The 0.7400 coincides with 3-week support and with a failure to hold the near-term support buyers may seek lower prices in the near term.
However, if prices manage to hold the 0.7400 support, bulls face a 0.7440 near-term barrier. With a break above the 0.7440 near-term resistance, fresh bullish interests may target 0.75500.