AUD/USD portrays pre-RBA anxiety above 0.6600, ignores upbeat Aussie data
- AUD/USD pauses three-day uptrend but lacks momentum ahead of RBA.
- Australia’s Q1 Current Account Balance came in better-than-forecast but fails to defend the Aussie bulls amid sluggish markets.
- Market sentiment dwindles amid light calendar, mixed feelings about Fed and RBA.
- RBA is likely to stand pat, positive surprise can’t be ruled out amid recently firmer Aussie data.
AUD/USD remains sidelined above 0.6600 as it depicts the trader’s indecision ahead of the key Reserve Bank of Australia (RBA) Interest Rate Decision on early Tuesday. In doing so, the Aussie pair also justifies the sluggish markets amid a light calendar and mixed concerns about the US Federal Reserve (Fed), especially after the recent downbeat US data. With this, the Aussie pair fails to react to the mid-tier data at home.
Australia’s first quarter (Q1) Current Account Balance came in 12.3 billion versus 5.175 billion expected and 14.1 billion prior. With this, the hawkish RBA bets gain momentum but fail to underpin the AUD/USD pair ahead of the central bank’s rate verdict.
On the other hand, the US ISM Services PMI declined to 50.3 for May versus 51.5 expected and 51.9 prior whereas growth of the Factory Orders also deteriorated during the stated month to 0.4% versus 0.5% market forecasts and 0.9% previous readings. It should be noted that the final readings of S&P Global Composite PMI and Services PMI also marked softer figures for May.
It’s worth noting that the market’s bets on the Fed’s June rate hike dropped from around 80% in the middle of the last week to nearly 25% after the downbeat US data. The same could have joined an absence of the Fed talks to weigh on the US Treasury bond yields and the US Dollar. However, hawkish comments from International Monetary Fund (IMF) Managing Director Kristalina Georgieva and concerns about the need for the US large banks to hold more capital to battle the landing crisis prod the AUD/USD buyers.
Amid these plays, Wall Street closed in the red whereas S&P500 Futures print mild losses by the press time. Furthermore, the US 10-year Treasury bond yields remain pressured around 3.68%, after reversing Friday's rebound the previous day, whereas the two-year bond coupons also defend the week-start bearish bias near 4.46% by the press time.
That said, the RBA is expected to keep the current monetary policy unchanged with a 3.85% benchmark rate. However, the recently positive Aussie data surrounding inflation and growth joins the Reserve Bank of New Zealand’s (RBNZ) hawkish move to allow some of the analysts to expect a 0.25% rate hike, which in turn can bolster the AUD/USD price in case of a positive surprise.
With this in mind, Analysts at the ANZ said, “Last week we revised up our terminal rate call in Australia 4.35%, as we no longer see 4.10% as sufficient to bring inflation back to the target quick enough. Nonetheless, we see it as a line ball call whether the RBA hikes at today’s meeting or waits until July, though favor a hike today at the margin.”
Technical analysis
As AUD/USD’s rebound from the support line of a falling wedge established in late December 2022 crossed 61.8% Fibonacci retracement of October 2022 to February 2023, it is all set to confront a convergence of the 50% Fibonacci retracement level and the 50-DMA, around 0.6660.
Also read: AUD/USD Price Analysis: Bulls eye 0.6660 resistance confluence and RBA Interest Rate Decision