The AUD/USD pair continued to decline in recent days, reaching a new multi-week low of 0.7248 on Friday before closing the trading week a few pips above that level. The global stock market traded sluggishly throughout the week before crashing on Friday, pulling down the commodity-linked currencies.
Midweek, the pair saw a couple of gains as earnings season surprises on Wall Street supported indexes.
What is the reason behind the dollar's sustained strength? Nothing novel is influencing the financial markets. Since the epidemic began in March 2020, worries have centered on sluggish economic growth. As the global situation began to improve, Russia invaded Ukraine and the coronavirus returned to China.
About a month ago, when Shanghai stated that it will impose a rigorous lockdown on more than 26 million people, supply-chain difficulties resumed their position at the forefront.
The decision has worsened the constraints caused by the epidemic, which in turn fuels inflation. In its most recent monetary policy meeting, policymakers at the Reserve Bank of Australia opened the door to a rate increase, joining the rate-hiking bandwagon.
Currently, it is anticipated that the central bank would raise rates by 40 basis points in June. Still, it lags far behind the US Federal Reserve, which is forecast to raise interest rates to a range of 2.75 to 3 percent by the end of the year, which is another cause for AUD/decline.
Since a result of the Russian-Ukraine conflict, the Australian dollar performed relatively well, as rising commodity prices gave support. However, as the crisis continues and the market prices reflect a protracted battle, the price of gold and oil has began to decline.
The precious metal concluded the week with losses at roughly $1,930 per troy ounce, following a failed attempt earlier this month to recapture the $2,000 barrier.
In recent days, the macroeconomic calendar provided scant information. In March, Australia released the Westpac Leading Index, which registered 0.35%.
In April, the early estimates for the S&P Global Manufacturing PMI were 57.9, while the services index was 55.6.
The United States will report March Durable Goods Orders, which are anticipated to increase by 1% month-over-month, and the GDP estimate for the first quarter, which is anticipated to increase by 1%.
By the end of the week, attention will move to the Personal Consumption Expenditures Price Index, the preferred inflation gauge of the Federal Reserve.
Australia will announce the Consumer Price Index for the first quarter, which is anticipated to be 4.6% YoY, significantly higher than the previous 3.5% and a potential cause for an RBA rate rise.
On Friday, the nation will release the Q1 Producer Price Index, which is anticipated to increase 4.2% year-over-year.
At 0.7233, the AUD/USD pair is reaching the 61.8% retracement of the advance from 0.6966 to 0.7660 in 2022. The weekly chart reveals that the pair's decline has accelerated below its 100 SMA, while the 20 SMA is trending moderately higher towards the indicated Fibonacci support level.
In the meanwhile, technical indicators are trending downward inside negative levels, with the RSI currently below its midline, indicating a sharper loss ahead.
The daily chart reveals that after failing to surpass its 20 SMA, the pair plunged and the signal went downward. The pair is also trading below a flat 200-period simple moving average, while the 100-period simple moving average is a few pips above the present level.
Technical indicators, on the other hand, decline nearly vertically as they approach oversold levels, reflecting the continuous decline and indicating a bearish continuation.
A breach below the 0.7230 price zone might result in a test of the 0.7100 level on route to the 0.6966 low for the year. The immediate Fibonacci resistance level is 0.7315, followed by the 38.2% retracement of the previously indicated surge at about 0.7400.
The FXStreet Forecast Poll predicts that AUD/USD might decrease in the short term, but the longer-term outlook is uncertain as bulls hold only a little edge and the pair is expected to oscillate around the 0.7300 level.
As the weekly moving average descends steadily, the Overview chart reflects the present pessimistic attitude.
The one-month moving average is steadily trending south but is neutral overall, whilst the quarterly average is unchanged.
