The AUDUSD exchange rate could see a breakout from its recent range this week.
AUDUSD – Weekly Chart
The Aussie dollar has been consolidating within the range of 0.656 to 0.6785, with a 2-300 pip move possible with a breakout.
Data on Tuesday will include Australian inflation, which will be critical to the pair’s price path. The Australian figure is expected to show price pressures cooling from 7.8% to 6.9% yearly.
The latest figures for the first quarter will be a crucial driver for the Reserve Bank. The RBA has paused its rate hikes for two consecutive meetings and said that inflation would decrease. New Zealand has seen its prices fall, but the central bank has been more aggressive. That could see the Australian numbers come down slower than they did for its neighbour. Australian policymakers also took into account some house price falls in their decision.
The RBA said it was “pausing” rate hikes, suggesting it could raise interest rates further if the data were supportive. That also indicates that the RBA hasn’t reached its so-called terminal rate, which would hold steady rates. The inflation figures will guide whether the bank’s decision to pause was right.
The United States also has important data out this week with a release of its Q1 growth figures. Analysts predict a drop in the GDP rate from 2.6% to 2%. Any deviation from that will drive the Aussie dollar vs US dollar pair.
AUDUSD Forecast
Data on Friday gave hope for the economy, with the S&P Global preliminary reading for business activity hitting an 11-month high. In contrast, the more extensive services sector hit a 12-month high. The report will challenge the expectation that a recession is close in the US.
“The latest survey adds to signs that business activity has regained growth momentum after contracting over the seven months to January,” wrote Chris Williamson at S&P. “The latest reading is indicative of GDP growing at an annualised rate of just over 2%,” he added.
Traders can trade in the direction of the breakout with a daily close for confirmation.
