The current state of the economy is a matter of concern, particularly with the economy hovering just above a recession. The Reserve Bank’s ability to stimulate economic growth through interest rate cuts is limited at the moment. The upcoming Australian Monthly CPI Indicator release on June 26 is anticipated to show an increase from 3.6% to 3.8% in May. Given the RBA’s focus on controlling inflation, there is a higher likelihood of an interest rate hike rather than a rate cut. This development will shape investor sentiment and could influence the AUD/USD pair.
The S&P Global Services PMI is a crucial indicator that affects inflation and economic growth. Analysts predict a decline in the Services PMI from 54.8 to 53.7, which could impact the AUD/USD pair significantly. A lower-than-expected Services PMI might increase speculation of a Federal Reserve rate hike in September. It is essential to consider various factors, such as input prices and housing services inflation, as they play a significant role in determining future monetary policy decisions.
FOMC member Austan Goolsbee’s concerns regarding housing services inflation highlight the complexities of the current economic situation. Improvements in the housing market could have long-term effects on inflation and monetary policy. While Manufacturing PMI and existing home sales figures are relevant, the S&P Global Services PMI is likely to take precedence in driving market trends. Investors should closely monitor US and Australian services sector PMIs, as they are key to understanding the market sentiment and potential shifts in monetary policies.
The recent performance of the AUD/USD pair indicates a bullish trend, supported by its position above the 50-day and 200-day EMAs. A break above the $0.67003 resistance level could trigger further bullish momentum towards $0.67500. Subsequently, breaching the $0.67500 mark may lead to a move towards the $0.67967 resistance level. However, a decline below the $0.66500 support level could shift momentum in favor of the bears, potentially targeting the 50-day EMA and the $0.65760 support level.
Economic indicators such as the Australian Monthly CPI, Services PMI, and FOMC member commentary have a significant impact on AUD/USD trends. Investors should closely monitor these indicators to make informed decisions regarding their trading strategies. The current economic environment poses challenges and opportunities for market participants, requiring a thorough understanding of the interconnected factors influencing exchange rates.