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The AUDUSD Market Analysis

3/31/2023 11:07 AM

The AUD/USD pair shows a slight increase, developing a "bullish" momentum and getting ready to end the week with a moderate increase. The instrument is testing 0.6720 for a breakout, updating the local highs of March 23.

The Australian Bureau of Statistics (ABS) on Wednesday reported that monthly inflation fell from 7.4% to 6.8%, which could slow down the pace of interest rate increases by the Reserve Bank of Australia (RBA). The monthly Consumer Price Index was the latest of four indicators that are decisive in whether the regulator will pause the cycle of increasing borrowing costs to assess the effect of 10 consecutive adjustments. Nevertheless, despite the effectiveness of the measures taken by the financial authorities, inflation is corrected mainly due to the prices of food, clothing, and construction, but is kept at high levels. Thus, the chief economist of the international network of audit companies KPMG International Ltd., Brendan Rynne, believes that inflation data reflects a positive trend towards a return to target levels of 2.0-3.0%; however, most likely, there will be another increase in interest rates by 25 basis points at the April meeting, followed by a pause to allow the RBA to observe the incoming data.

The instrument maintains a weak "bullish" momentum amid the prevailing optimism in the market, while analysts are waiting for the publication of a block of US macroeconomic statistics on personal income and spending. The day before, revised data on the dynamics of the Gross Domestic Product (GDP) of the United States for the fourth quarter of 2022 were released. According to the final assessment, the country's economy added 2.6% in the fourth quarter, while growth was previously estimated at 2.7%. Also, traders were somewhat disappointed by another increase in the number of Initial Jobless Claims for the week ended March 24 from 191.0 thousand to 198.0 thousand, which turned out to be 2.0 thousand worse than market expectations. The number of Continuing Jobless Claims for the week ended March 17 increased from 1.685 million to 1.689 million, while analysts had expected 1.697 million.

Today, statistics from China provide some support for the instrument. The Services PMI in March rose from 56.3 points to 58.2 points, which turned out to be better than the average forecasts. The Manufacturing PMI from the National Bureau of Statistics (NBS) for the same period fell from 52.6 points to 51.9 points, but still turned out to be better than expected at 51.5 points.

Bollinger Bands in D1 chart show unsteady growth. The price range is narrowing from below, reflecting a predominantly mixed trading dynamics in the short term. MACD indicator is growing, while preserving a rather stable buy signal (located above the signal line). Stochastic is showing similar dynamics; however, the indicator line is already approaching its highs, indicating the risks of overbought instrument in the ultra-short term.

Resistance levels: 0.6750, 0.6800, 0.6853, 0.6900. | Support levels: 0.6700, 0.6650, 0.6624, 0.6600.

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