This week, the AUD/USD pair resumed growth, turning around 0.6590 (Murrey level [2/8]), and is currently testing the middle line of Bollinger bands at 0.6714.
The main reason for the weakening of the US currency seems to be a possible adjustment of the US Federal Reserve's monetary rate, associated with the release of February inflation data and the latest negative events in the banking sector. The simultaneous failure of two large financial structures at once, Silicon Valley Bank and Signature Bank, seriously worried the regulator, so it was forced to introduce a 25.0B dollars Bank Term Financing Program (BTFP). Experts believe that to finally stabilize the financial system, officials can go for a slower increase in interest rates by 25.0 basis points instead of a possible 50.0 basis points, or even temporarily suspend the monetary tightening cycle so as not to create new economic pressure. The February CPI data confirmed this possibility, as inflationary pressures fell from 6.4% to 6.0% YoY, while the core index fell from 5.6% to 5.5%. The possibility of the regulator's easing has pushed alternative asset prices up, although experts are still not sure which issue officials will see as a top priority – inflation or banking stability.
Despite the strengthening of the Australian dollar, its position remains vulnerable due to the difficult economic situation in the country. Rising inflation and high rates from the Reserve Bank of Australia harm households and businesses, causing a decrease in domestic demand and a slowdown in business activity. The Westpac Consumer Sentiment Index released in March showed it remaining at a low level of 78.5 points, the National Bank of Australia (NAB) current business conditions index fell from 18.0 to 17.0 points in February, and the index of confidence in the prospects – from 6.0 to –4.0 points. Also, investors are worried about the slower-than-expected recovery of China's economy: in February, its industrial production rose only by 2.4% instead of the 2.6% predicted, which could negatively affect the export of Australian raw materials. Against this background, the prospects for further growth of the national currency are seen as limited.
Now, the trading instrument is testing 0.6714 (Fibonacci retracement 38.2%, the middle line of Bollinger bands, Murrey level [3/8]), consolidation above which will give the prospect of further growth to 0.6885 (Fibonacci retracement 50.0%), 0.6958 (level Murrey [5/8]). The key “bearish” level is 0.6590, the breakdown of which will give the prospect of a decline to 0.6469 (Murrey level [1/8]) and 0.6347 (Murrey level [0/8]).
Technical indicators signal that the downtrend continues: Bollinger bands are reversing downwards but the MACD histogram is decreasing in the negative zone, and Stochastic is pointing upwards, which does not rule out new growth attempts.
Resistance levels: 0.6714, 0.6885, 0.6958. | Support levels: 0.6590, 0.6469, 0.6347.