Mixed Data and Economic Concerns Cloud AUD Growth Prospects

The Reserve Bank of Australia (RBA), maintained its interest rate at 4.35%, a 12-year high, during its June policy meeting, signaling that further hikes could occur if necessary to manage inflation. This decision came amid an economy that nearly stalled in the first quarter and slower-than-expected wage growth.

Despite mixed recent data, the RBA emphasized vigilance towards inflation risks, with inflation still at 3.6%, above the target range of 2-3%. Markets have priced in no immediate rate cuts, expecting the earliest potential cuts in 2025.

Consumer sentiment slightly improved in June due to promised tax cuts, despite concerns over potential higher borrowing costs. Although family finances saw some improvement, economic outlook remains grim, with the index for buying major household items at 79.7, far below its long-term average of 124.

Morgan Stanley reported that despite strong property price growth, Australia's housing sector is facing a downturn in activity. Indicators such as rising insolvencies in residential construction suggest significant issues.

The U.S. dollar remained strong on Wednesday, as investors awaited U.S. price data due later in the week. The dollar's rise on Tuesday was supported by hawkish comments from Federal Reserve officials and stable housing market data, suggesting the Fed might delay rate cuts.

U.S. single-family home prices rose 0.2% in April, showing steady growth despite higher borrowing costs. Housing inventory increased as mortgage rates remained high, and existing home sales fell for the third month in a row in May.

The average rate for a 30-year fixed mortgage reached a six-month high of 7.22% in early May, according to Freddie Mac. Although it has decreased to 6.87% last week, it is still higher than the 6.67% average from the same period last year.

U.S. consumer confidence slightly decreased in June, but labor market optimism and moderated inflation expectations helped maintain economic stability. The survey also indicated a reduced perceived likelihood of a recession over the next 12 months compared to April and May. While fewer consumers plan to purchase vehicles and household appliances in the next six months, more intend to go on vacation. Strong labor market conditions continue to support consumer spending and the overall economy.

Political considerations remain on consumers' minds, but fewer believe the upcoming November presidential election will significantly impact the economy compared to the same period in 2016, although slightly more than in June 2020. Investors are now anticipating the release of the U.S. personal consumption expenditures (PCE) price index, the Fed's preferred inflation measure, on Friday. Therefore, it is anticipated that the Australian dollar (AUD) will continue to face restricted long-term appreciation in the foreseeable future.

Data for Technical Analysis (1H) CFD AUD/USD

Resistance : 0.6676, 0.6683, 0.6695

Support : 0.6652, 0.6645, 0.6633

1H Outlook

Source: TradingView

Buy/Long 1 If the support at the price range 0.6642 - 0.6652 is touched, but the support at 0.6652 cannot be broken, the TP may be set around 0.6685 and the SL around 0.6637, or up to the risk appetite.

Buy/Long 2 If the resistance can be broken at the price range of 0.6676 - 0.6686, TP may be set around 0.6715 and SL around 0.6647, or up to the risk appetite.       

Sell/Short 1 If the resistance at the price range 0.6676 - 0.6686 is touched, but the resistance at 0.6676 cannot be broken, the TP may be set around 0.6652 and the SL around 0.6691, or up to the risk appetite.

Sell/Short 2 If the support can be broken at the price range of 0.6642 - 0.6652, TP may be set around 0.6620 and SL around 0.6681, or up to the risk appetite.       

Pivot Points Jun 26, 2024 02:57AM GMT