AUDUSD – Daily Chart
AUDUSD has slipped from its recent highs above the 0.6800 level and bounced at 0.6525. But the bounce has been weak, and data could see the pair target that support level again.
The first data for the Australian economy is 8:30 a.m. HKT release of Inflation. Analysts expect a sharp drop from 5.4% to 4.3%. The country’s economy has weakened due to higher interest rates and inflation pressures.
On Tuesday, the IMF upgraded its forecasts, saying the Australian economy would expand by 1.4% this year, a 0.2% increase on its previous annual forecast. Inflation is also expected to ease to an average of 2.6% in 2024.
Earlier this month, the IMF recommended that the RBA hike interest rates even higher “to ensure inflation comes back to target earlier than 2026,” which is against the market’s belief that the central bank had finished its aggressive run of monetary tightening. If there are signs of further interest rate increases, that would spur a big rally against the USD.
The Federal Reserve also meets to announce its latest interest rate plans this week. That announcement will come before the Asian markets open on Thursday but could significantly drive the AUDUSD in the upcoming sessions.
The Fed is expected to hold its current short-term rate steady at a 22-year high of 5.25% to 5.5% for a fourth straight meeting. Yet some economists hope the Fed will begin lowering rates again as soon as March, which means it could signal its intentions this week.
Any hint of pushing rate cuts out further could see the Australian dollar regain its previous strength. After the Fed meeting, traders will look at the US ISM manufacturing data, which weakened last month. A US payroll number will finish the trading week for the US dollar.
