AUD/USD Bullish at 0.6700, Nears 0.6750 Resistance

AUD/USD Bullish at 0.6700, Nears 0.6750 Resistance

Key Points

  • AUD/USD Technicals: Trading at 0.6700, the pair shows bullish sentiment with key resistance at 0.6750 and support at 0.6650.
  • AUD Strengthening: The Australian Dollar rose for a second session, driven by a weaker US Dollar.

On Monday, the Australian Dollar (AUD) strengthened for the second consecutive session, bolstered by a weaker US Dollar. The depreciation of the US Dollar provided a supportive backdrop for the AUD, enabling it to gain traction in the foreign exchange markets. The relative weakness of the US currency often enhances the appeal of alternative currencies, including the AUD, by making them more attractive to investors seeking higher yields and returns.

AUD/USD: PBOC Holds Rates at 3.45% and 3.95%, Surprises Markets

However, the AUD’s gains were somewhat curtailed following the People’s Bank of China’s (PBOC) interest rate decision. On the same day, the PBOC opted to keep the one-year Loan Prime Rate (LPR) steady at 3.45% and the five-year LPR unchanged at 3.95%. This decision surprised some market participants who had anticipated a potential cut to stimulate economic growth. The steady rates signalled a cautious approach from the Chinese central bank, reflecting concerns about financial stability amidst broader economic challenges.

Australia’s 10-Year Yield Hits Monthly Low at 4.2%

Simultaneously, Australia’s 10-year government bond yield experienced a decline, hovering around 4.2%, the lowest level in a month. This drop was attributed to a softer domestic jobs report for the first quarter and slowing wage growth, which tempered expectations for aggressive monetary tightening by the Reserve Bank of Australia (RBA). The softer economic data led markets to discount the likelihood of any imminent interest rate hikes by the RBA, further influencing bond yields downward.

Wage Price Index Up 0.8% in Q1, Misses 0.9% Forecast.

In the first quarter, Australia’s Wage Price Index (WPI) rose by 0.8%, falling short of the market forecast of a 0.9% increase. This represents the smallest quarterly increase since late 2022, indicating a potential slowdown in wage growth. The modest wage rise suggests easing inflation, reducing the urgency for the RBA to implement rate hikes. Slower wage growth could signal a cooling labour market, which might alleviate some inflationary pressures that have concerned policymakers.

AUD/USD Technical Analysis: Bullish at 0.6700

The AUD/USD pair trades at 0.6700, exhibiting an ascending triangle formation. The 14-day Relative Strength Index (RSI) is above 50, indicating bullish sentiment. The potential upper test level is 0.6714, with a significant barrier at 0.6750. On the downside, several support levels exist. The 9-day Exponential Moving Average (EMA) stands at 0.6653. Additionally, a major level is set at 0.6650. Furthermore, the lower boundary of the triangle is at 0.6610. There’s also a psychological level of 0.6600. Lastly, throwback support appears at 0.6550.