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15.05.202400:49 Forex Analysis & Reviews: The aussie will try to develop bullish momentum. Overview of AUD/USD

Australia's NAB business confidence index held steady at 1 in April 2024, while its index of business conditions fell 2 points to +7. All three components used in the calculations – employment, capacity utilisation, and forward orders – slightly declined, indicating signs of a slowdown in economic activity.

Exchange Rates 15.05.2024 analysis

In fact, this is the exact result the Reserve Bank of Australia is aiming for – a decline in activity as a key factor in reducing inflation. The only question is when this will happen. The RBA is monitoring the situation. Following last week's meeting, the markets have reduced the likelihood of a rate hike to almost zero and expect the rate to remain unchanged for longer. In other words, the rate will neither rise nor fall, making the RBA a passive observer in forecasts for the AUD/USD exchange rate, with everything depending on external factors such as changes in the Federal Reserve policy, global inflation, and economic recovery.

In the first quarter, inflation was higher than expected, and as RBA Governor Michelle Bullock admitted, the option of another rate hike was discussed but ultimately dismissed. Since the economy is slowing down, the likelihood of rising inflation decreases, which is exactly what is needed.

The April labor market report will be released on Thursday, accompanied by neutral forecasts. The main focus, as usual, will be on the dynamics of average wages, but the report is unlikely to cause any significant market reaction. Everything will be decided on Wednesday when the US Consumer Price Index is released. This is the event the markets are waiting for, and it is capable of causing movement in the dormant market. The Australian dollar will likely react in sync with other currencies.

The net short AUD position decreased by $1.13 billion to -$4.26 billion over the reporting week. Speculative positioning remains bearish, but short positions have been steadily decreasing for three consecutive weeks, indicating a bullish trend for the AUD. The price is above the long-term average and is headed upward.

Exchange Rates 15.05.2024 analysis

AUD/USD is making another attempt to reach the technical level of 0.6679, we expect it to succeed. Passing the resistance area at 0.6670/80 will increase the chances of corrective growth. The long-term target is 0.6875/6900, but the movement is still under a big question and will primarily depend on changes in the Fed policy, not on internal factors.

*La presente analisi del mercato ha un carattere esclusivamente informativo e non rappresenta una guida per l`effettuazione di una transazione.

Kuvat Raharjo,
Analytical expert of InstaSpot
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