The trend of strengthening of the dollar in the world market has also affected the Australian dollar. AUDUSD currency pair today breaks through a key support, which was relevant in the last six months. If this signal is confirmed, a move to a stronger dollar in the short term can be seen.
The Australian dollar continues to be under pressure from the Fed's tight policy.
According to James Bullard, president of the Federal Reserve Bank in St. Louis, the U.S. central bank will have to raise interest rates two more times this year to keep inflation under control.
Bullard was one of the first proponents of hawkish policies before the financial authorities began to raise the cost of borrowing. This year, he will not be voting on the Federal Open Market Committee, which determines monetary policy.
In March, economic growth was stable and price pressures eased slowly, contrary to the expectations of regulators.
The U.K. inflation data that came out today confirms the persistence of inflationary pressures around the world. On this background, central banks will be forced to continue raising rates, which will lead to further growth of the dollar index. A similar movement was observed last year.
The consumer price index was 8.7% in April, which was higher than any of 36 economists' estimates or the central bank's forecast of 8.4%. Base prices excluding food, energy and tobacco products rose from 6.2% in March to 6.8% last month. According to analysts, inflation was more stable than the Bank of England had expected. As a result, the regulator will have to raise interest rates from 4.50% to 4.75% in June and maybe continue to raise them in following months.
According to the technical analysis, the AUDUSD currency pair breaks down a strong support. The level of 0.6531 will be the first downside target. It corresponds to the previous resistance level, which was relevant in September and October 2022. Stop-loss can be set at the growth above the maximum of today's candle at 0.6620. This movement will mean a return to the range and the cancellation of the scenario of further dollar strengthening.
The AUDUSD currency pair decline:
Take profit – 0.6531
Stop-loss – 0.6620
This content is for informational purposes only and is not intended to be investing advice.