The AUD/USD currency pair continues to be in a downtrend. The strengthening of the U.S. dollar against all currencies is the main driving force. Such dynamics of the U.S. currency is caused by strong economic data in the country and by new intentions of central banks to continue raising key interest rates.
The weakening of the Australian currency this week was also caused by a decline in the country's inflation rate. The consumer price index came to 5.6%. At that time, analysts were expecting inflation to rise by 6.1%. The regulator may soften its key rate signal next week, which will weaken Australia's currency.
However, there are additional factors that influence the weakening of the Australian dollar. Australia is trying to negotiate a free trade agreement with the EU. However, the parties cannot yet come to a common point of view.
The government rejected suggestions that the trade deal with Europe was imminent. According to Secretary of Commerce Don Farrell, an agreement will not be reached without an access to the market for domestic agricultural products. Unofficially, European negotiators believe that a free trade agreement can be signed in the coming weeks. Until then, the lack of an agreement will concern Australian dollar traders.
The U.S. dollar is also supported by macrostatistics releases.
This week's data shows a resilient U.S. economy, easing some concerns about the coming recession. However, this increased expectations that the Federal Reserve System (Fed) would continue its tight policy.
On Thursday, at a central bank meeting in Madrid, Fed Chairman Jerome Powell confirmed the probability of at least two more rate hikes by the end of the year.
Now investors estimate the probability of a further monetary tightening in July at 87%, according to the CME Fedwatch tool. On this background, the dollar index stabilized at a two-week high.
According to the technical analysis, the AUD/USD currency pair continues to trade in a downtrend. Based on the latest news, this trend may continue in the short term. Now there is a small pullback after a long decline, the quotes are under the resistance level of the downtrend.
The level of 0.658 can be the downside target. Since the beginning of the year, it has supported the Australian dollar two times. Stop-loss can be set at the downtrend break and at the renewal of the last two trading days highs, which corresponds to the price of 0.665.
Growth of the AUDUSD currency pair:
Take profit – 0.658
Stop-loss – 0.665
This content is for informational purposes only and is not intended to be investing advice.
