AUD/USD chart flags bullish potential as RBA nears amid China lockdown

Monday’s Asia-Pacific outlook

sia-Pacific markets will kick off the week with a focus on tomorrow’s interest rate decision out of Australia. The Reserve Bank of Australia (RBA) is expected to hold rates steady at 0.1%, but expectations for a hike in the second half of the year have strengthened in recent weeks. Those expectations have seen the yield on Australia’s 10-year bond climb nearly 100 basis points in just four weeks. It is currently trading just below 3.0%, the highest level since May 2018.

Although analysts remain split on when the RBA’s first rate hike in more than a decade will take place, the majority see liftoff occurring at the June, July or August meeting. The Australian Dollar has taken advantage of these hawkish perceptions, with the currency moving higher versus its major peers through March. However, the 2022 Australian federal election set to take place in May adds a layer of complexity to predicting a rate hike. RBA Governor Lowe may prefer to keep rate steady so close to an election.

This morning, the Melbourne Institute inflation gauge for March will cross the wires, followed by a final reading on February retail sales and March job advertisements from ANZ Bank. A solid showing in those data prints may help to strengthen the Aussie Dollar. Later today, India will report manufacturing PMI data for March, and Thailand will report business confidence for the same period.

Crude oil prices will likely remain under close observation as the conflict in Ukraine rages as war crime accusations grow. The current Covid outbreak in China has locked down Shanghai – a major financial hub – and cases are still rising despite the restrictions. Extended lockdowns may begin to exact a toll on China’s stock market, particularly at a time when the rest of the world continues to roll back restrictions. Demand-sensitive oil prices treaded lower alongside last week’s news of a supply release from US strategic reserves.

AUD/USD technical forecast

AUD/USD consolidated last week following several weekly gains. That movement has created a Bull Flag pattern, which may precede further gains. A break above flag resistance could see prices climb to fresh 2022 highs. The October 2021 top at 0.7556 may act as resistance. Alternatively, a break below Flag support could see the 78.6% Fibonacci level at 0.7430 come into focus. The 61.8% Fib at 0.7331 follows.

AUD/USD 8-hour chart

Follow Thomas Westwater on Twitter @FxWestwater

This information has been prepared by DailyFX, the partner site of IG offering leading forex news and analysis. This information Advice given in this article is general in nature and is not intended to influence any person’s decisions about investing or financial products. ​

The material on this page does not contain a record of IG’s trading prices, or an offer of, or solicitation for, a transaction in any financial instrument. IG accepts no responsibility for any use that may be made of these comments and for any consequences that result. No representation or warranty is given as to the accuracy or completeness of this information. Consequently, any person acting on it does so entirely at their own risk.