Price pressure on the Australian economy is still present

The Reserve Bank of Australia (RBA) warned of rising inflation concerns last Friday, after raising interest rates for the 11th time to 3.85%. Despite the fact that domestic output continues to increase slowly in the face of rising energy prices and skyrocketing rents or housing expenses as a result of population expansion that exceeds projections.

The RBA believes inflation peaked at 7.8% at the end of last year and anticipates it to fall to a target range of 2-3% by mid-2025, implying a slower price decline than in other affluent countries and more upside possibilities.

However, the RBA expects core inflation to slow to around 4.0% by the end of the year from current rates near a 30-year high of 6.6%, and to 2.9% by mid-2025, with rent or housing inflation remaining at risk due to rising immigration, which is expected to be a significant contributor to inflation in the coming years. While increased gas and electricity prices may raise inflation this year, there is a possibility that some corporations will choose to boost profit margins rather than drop prices when costs fall.

Annual wage growth is predicted to peak at 4.0% at the end of the year, up from 4.2% previously, before declining to 3.7% by mid-2025. The unemployment rate is predicted to grow to 4.5% by mid-2025, up from 3.5% now. All of these projections assume that interest rates will peak at roughly 3.75% in mid-2023 before falling back to around 3% in June 2025.

The Australian government anticipates the federal budget to release around A$14.6 billion ($9.84 billion) over four years to relieve price and inflation pressures on households and companies. It will aim to control spending in order to avoid inducing excessive inflationary pressure. The budget deficit in Australia is likely to diminish dramatically as a result of commodity export taxes, while there will still be a deficit tendency in the future.

Meanwhile, Australian exports to China reached a new high in March, thanks to the shipment of additional iron ore and fine iron ore to China. Total exports to China reached A$19 billion ($12.71 billion), up 31% from the previous year, boosting Australia's total trade surplus to A$15.3 billion, the second-highest amount on record.

The US dollar pair's downside is still restricted after plunging last week as the Federal Reserve signaled the end of interest rate rises. Markets will be paying close attention to US inflation data and financial institution credit data next week and by the beginning of this month.

According to CME FedWatch, the probability of the Fed cutting rates in July is projected to be around 30%. Despite the fact that US employment statistics are still higher than predicted. Meanwhile, concerns about rising US debt ceilings may promote dollar appreciation due to liquidity or safe haven demands.

Data for Technical Analysis (5H) CFD AUD/USD

Resistance : 0.6753, 0.6756, 0.6760

Support : 0.6745, 0.6742, 0.6738                        

5H Outlook

1H Outlook    

Source: Investing.com        

Buy/Long 1 If the support at the price range 0.6740 - 0.6745 is touched, but the support at 0.6745 cannot be broken, the TP may be set around 0.6753 and the SL around 0.6737, or up to the risk appetite.

Buy/Long 2 If the resistance can be broken at the price range of 0.6753 - 0.6758, TP may be set around 0.6760 and SL around 0.6720, or up to the risk appetite.       

Sell/Short 1 If the resistance at the price range 0.6753 - 0.6758 is touched, but the resistance at 0.6753 cannot be broken, the TP may be set around 0.6764 and the SL around 0.6740, or up to the risk appetite.

Sell/Short 2 If the support can be broken at the price range of 0.6740 - 0.6745, TP may be set around 0.6731 and SL around 0.6756, or up to the risk appetite.       

Pivot Points May 08, 2023 03:34AM GMT

Sources: Investing 1, Investing 2