The Australian Dollar (AUD) continued its upward trajectory for the third consecutive session on Wednesday, reaching a four-week high against the US Dollar (USD) at 0.6644. The AUD/USD pair’s ascent has been attributed to the challenges faced by the USD, particularly in light of declining US Treasury yields.
Investor sentiment toward the Australian Dollar has strengthened as doubts emerge regarding the necessity for the Reserve Bank of Australia (RBA) to implement interest rate cuts in 2024. This skepticism arises amidst expectations of the Federal Reserve (Fed) maintaining its stance on higher interest rates.
The RBA has signaled reluctance towards further rate hikes, awaiting greater confidence in the inflation outlook before considering any cuts. Attention now turns to the release of US Consumer Price Index (CPI) data and the Federal Open Market Committee (FOMC) Minutes later in the North American session.
Market Insights: Australian Dollar Gains Amid RBA Rate Cut Speculations
Westpac Consumer Confidence Index for April registered a decline of 2.4%, following a previous decrease of 1.8%.
Forecasts from Commonwealth Bank suggest the possibility of three 25 basis points (bps) interest rate cuts by year-end, with the first potentially occurring in September.
Divergent opinions exist among major banks regarding the timing of interest rate cuts, with Westpac predicting cuts to commence in September, while NAB and ANZ anticipate a later initiation in November.
Federal Reserve Bank of Minneapolis President Neel Kashkari emphasized the Fed’s commitment to curbing inflation, despite current rates hovering around 3%, with a target level of 2%.
According to the CME FedWatch Tool, the probability of a 25-basis point rate cut by the Fed in June stands at 53.5%, with a slight decrease in the likelihood of a cut in July to 49.9%.
US headline CPI is expected to accelerate in March, while the core measure is projected to exhibit a moderation.
Technical Analysis: Bullish Sentiment for AUD/USD Pair
The AUD/USD pair is currently trading around 0.6620, with technical indicators suggesting a bullish sentiment. The Moving Average Convergence Divergence (MACD) positioning above the centerline, coupled with a divergence above the signal line, indicates potential for further gains.
Key resistance levels are identified at 0.6650 and March’s high of 0.6667, while support levels include the 23.6% Fibonacci retracement level of 0.6605, the psychological level of 0.6600, the nine-day Exponential Moving Average (EMA) of 0.6584, and the major support level of 0.6550.
