The AUD/USD pair has been on an upward trend for the second consecutive day, reaching a one-week high near 0.6453. This positive movement follows a period of rapid decline and is supported by encouraging economic data from Australia. The latest manufacturing PMI report for April showed a significant increase to 49.9 points, up from 47.3 the previous month. This improvement brings the manufacturing sector close to the critical 50.0 threshold, indicating potential growth. Additionally, the services PMI reported the most robust expansion in the last three months, with the private sector also experiencing its fastest growth in two years during April. These economic reports not only demonstrate a resilient economy but also carry pro-inflationary implications.
Implications for Monetary Policy
The strong economic data bolster the outlook that the Reserve Bank of Australia (RBA) may maintain higher interest rates for a longer period to manage inflationary pressures effectively. Investors are keenly watching for the upcoming release of inflation statistics later in the week, which will provide further insights into the economic factors influencing the RBA’s monetary policy decisions. Furthermore, reduced investor concerns over geopolitical risks in the Middle East have contributed to a more favorable risk environment, supporting the Australian dollar’s gains.
Technical Analysis of AUD/USD Pair
On the H4 chart, the AUD/USD pair completed a declining wave to 0.6362 and is now in a corrective movement towards 0.6471. Following this correction, a continuation of the downward trend towards 0.6300 is expected. Despite the MACD indicator showing growth potential with its signal line above zero, the bearish outlook remains strong. On the H1 chart, a consolidation range has formed around 0.6417, and a breakout above this range could lead to a rise towards 0.6471. However, after reaching this peak, a new downward wave towards 0.6363 is anticipated. The Stochastic oscillator, with its signal line pointing downwards below 80, confirms the potential downward trajectory.
The Australian dollar is showing signs of strength, supported by positive economic data and reduced geopolitical risks. The outlook for the AUD/USD pair remains positive, with the potential for further upward momentum in the near term. However, investors should remain cautious and closely monitor key economic indicators for any shifts in market sentiment.