The Australian dollar hits back after the Easter weekend, up roughly 0.50% against the U.S. dollar this Tuesday. In last week’s strong US jobs data, markets ramped up bets for a higher Fed terminal rate for 2023, pricing in a 25bps interest rate hike for the May meeting. This morning, a massive uptick in Australian consumer confidence (see economic calendar below) for April reached the highest levels since June 2022. The report is a reflection of economic strength from a household’s perspective.
Chinese inflation missed estimates while PPI figures slumped indicative of a struggling economy post-pandemic. Further room for easing monetary policy may be on the cards to stimulate the Chinese economy and the demand for its goods and services. Despite this, the AUD benefitted from a deal between China and Australia that could result in the removal of tariffs on Australian barley that was implemented in 2020 at the height of diplomatic tensions. Being Australia’s largest trading partner, the elimination of the roughly 80% tariff level could lead to an additional tariff retraction in other commodity spaces including coal, wine and timber.
Daily AUD/USD price action stays hesitant after the rising wedge chart pattern (black) breakout that traditionally points to the subsequent downside. That being said, a looming death cross could catalyze this downside move that is likely to stem from the upcoming US CPI print (elevated inflation data could heighten hawkish Fed bets leaving the Aussie dollar exposed). Looking at the Relative Strength Index (RSI), the reading around the 50 level reiterates markets uncertainty but is sure to favor some directional bias post-CPI.