AUD/USD, AUD/CAD, and GBP/AUD Analysis: Australian Dollar Falters Ahead of Inflation Data
As the Australian dollar (AUD) continues to face downward pressure against several major currencies, analysts are focusing closely on the upcoming inflation data. The AUD’s current precarious position is attributed to a stronger US dollar (USD) and waning expectations of a robust monetary policy from the Reserve Bank of Australia (RBA).
Market Dynamics Affecting the AUD
The US dollar gained momentum recently following an announcement from former President Donald Trump regarding support for American car manufacturers. This support, which includes tax credits of up to 15% for vehicles assembled in the US, appears to have bolstered confidence in the US economy. Additionally, US Commerce Secretary Lutnik indicated that a preliminary trade deal had been reached with a foreign nation, although specifics remain undisclosed.
The upward trend in the USD and a concurrent decline in commodity prices have placed considerable strain on the Australian dollar, typically sensitive to fluctuations in commodity markets. As investors brace for forthcoming inflation data, market sentiment regarding the AUD continues to weaken, particularly against currencies like the British pound (GBP), Japanese yen (JPY), and Canadian dollar (CAD).
AUD/USD and Technical Analysis
The pair of AUD/USD is wrestling with the critical 200-day Exponential Moving Average (EMA). Recent trading patterns suggest that the Australian dollar may be poised for further declines, particularly after the formation of a bearish engulfing candle, which is indicative of potential downward momentum.
The technical outlook shows a significant rejection at the 50% retracement level, with prices closing below critical support at the 64 cents handle. Analysts predict a possible decline to around 63 cents, particularly if upcoming Consumer Price Index (CPI) figures come in weaker than expected—a situation that could fuel aggressive bets for an RBA rate cut in May.
AUD/CAD: Sentiment Shifts
Turning to AUD/CAD, bullish momentum has been noticeably slowing following a three-week rebound originating from April 2020 lows. Recent trading has exhibited choppy behavior, with price action remaining around the January low. Resistance levels at the 50-day EMA and historical volume point of control indicate potential vulnerabilities for AUD/CAD. A bearish engulfing candle formation on the daily chart raises concerns of a potential retracement below April’s lows.
GBP/AUD: A Competitive Landscape
Conversely, GBP/AUD has shown more resilience, climbing to a 12-day high supported by a solid bullish trend. This increase is attributed to renewed expectations of divergent monetary policies between the Bank of England (BoE) and the RBA. The GBP is experiencing strength as bets on slower rate cuts from the BoE gain traction, with GBP/AUD breaking through near-term consolidation patterns. Analysts are now looking towards potential levels of resistance above the 2.10 mark.
Conclusion
The Australian dollar is facing significant challenges as it navigates a stronger US dollar and changing market dynamics leading up to key inflation announcements. The interplay between currency pairs such as AUD/USD, AUD/CAD, and GBP/AUD will be crucial in the coming weeks as investors assess the implications of these economic indicators on future central bank policies. The upcoming CPI data will serve as a critical barometer for gauging market expectations and could set the tone for the Australian dollar’s performance in the near term.
For traders and investors, it’s imperative to remain vigilant of these developments as they could significantly influence currency trading strategies.
Written by Matt Simpson, Market Analyst
Follow Matt on Twitter: @cLeverEdge
Related Topics: AUD/USD, GBP/AUD, AUD/CAD Analysis, Forex Market Trends
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