AUSTRALIAN DOLLAR FUNDAMENTAL BACKDROP The Australian dollar is trading in the red against the U.S. dollar this Friday morning as risk appetite dwindles. The greenback’s safe-haven appeal has come into play via renewed attacks from Russia in Ukraine US banking concerns. Emergency borrowings from the Federal Reserve increased for the second consecutive week underlining the tension in the financial sector. Earlier this morning, Australian housing credit data (see economic calendar below) for March printed in line with forecasts at 0.3% and maintains its downward trajectory as high interest rates make borrowing less attractive from a private sector point of view. Later today, the Fed’s preferred measure of inflation (Core PCE) is due and anything suggestive of elevated levels may interfere with money market expectations on the Fed’s rate hike cycle that currently predicts only one more 25bps rate hike next week. Michigan consumer sentiment will close off the trading week with preliminary signs of a higher release than the March print (a USD positive).The RBA’s interest rate expectations (refer to table below) have been muted over the last few weeks, now anticipating no further rate hikes despite the strong inflation print on Wednesday. Should the Fed increase rates next week, the interest rate differential between the two nations will increase in favor of the US, making the USD more attractive moving forward. Although mostly priced in already, any indication as to more potential US rate hikes would likely hurt the Aussie dollar. RBA INTEREST RATE PROBABILITIES Daily AUD/USD price action extends it’s bearish move after the bear flag (black) breakout on Tuesday and death cross (red). The next level under consideration for bears will be the 0.6565 swing low, with a break below signaling a fresh yearly low for the pair.
Key resistance levels:
0.6700/50-day MA (yellow)
Key support levels:
IG CLIENT SENTIMENT DATA: MIXED
IGCS shows retail traders are currently LONG on AUD/USD, with 78% of traders currently holding long positions. At Daily FX we typically take a contrarian view to crowd sentiment resulting but due to recent changes in long and short positioning, we arrive at a short-term cautious disposition.