The AUD/USD currency pair is currently in a down-leg within a narrow trading range, indicating a sideways trend. Given the market’s inclination towards the “trend is your friend” principle, the odds favor an extension of this range-bound movement. However, a decisive break above or below the range could signal a new directional trend.
As a result of higher US Treasury yields seen on Friday, the Australian dollar has edged lower while the US dollar has remained strong. Despite this, the AUD/USD pair attempted to recover earlier losses following a Reuters poll of 43 economists. The poll suggests that the Reserve Bank of Australia (RBA) might maintain its current interest rates in June. A significant 90% of the economists surveyed anticipate stable interest rates over the upcoming quarter, with a potential 25 basis-point decline to 4.10% by the end of 2024. Furthermore, 63% foresee interest rates declining to 4.10% or below by the year’s end, while 35% expect no change.
The US dollar has maintained its stability despite gains from the previous session, even with the release of economic data indicating a softer US Producer Price Index (PPI) and higher-than-expected Initial Jobless Claims. Federal Open Market Committee (FOMC) policymakers have revised their outlook, now anticipating only one rate cut for the year, down from three cuts forecasted in March. This revised outlook is bolstering the USD’s resilience and putting pressure on the AUD/USD pair.
Investors are now awaiting the release of the preliminary US Michigan Consumer Sentiment index on Friday. This key indicator will provide additional insights into consumer confidence and the broader economic outlook.
Trade Idea:
Consider buying AUD/USD on a decisive breakout above 0.6770 or selling below 0.6521.