The aussie is trying to skyrocket. However, all its attempts turn out to be unsuccessful because of the bearish trend that prevents it from reversing.
At the end of last week, the Australian dollar sagged despite hopes of a bull run. Among factors that restrained the aussie from rising were decreased risk appetite and a spike in the price of base metals. The Australian dollar is recognized as a commodity currency that depends on the price of crude oil and a number of metals, especially iron ore. One of Australia's main partners, China, has recently reported on an increase in commodity prices. Experts feared that the aussie would face pressure due to the announcement but it did not happen.
The Australian currency is still trading in the 0.7675–0.7900 range. Early on Friday, AUD/USD traded near 0.7743–0.7744 and tested other levels.
Citi strategists assume that AUD/USD may fall to 0.7670 in the short term and rise in the mid-term amid moderate risk appetite and the prolonged weakness of the US dollar.
Australia's disappointing macroeconomic data also contributed to the aussie's bearish move. According to the Australian Bureau of Statistics, the wage price index went up by 0.6% in the first quarter of 2021, whereas employment plunged by 30.6K versus market expectations of a 20K rise. Meanwhile, Australia's full time employment increased by 34K, while the unemployment rate dropped by almost 0.2% to 5.6% this March.
Wages are growing in Australia but the pace is not enough to make the Reserve Bank of Australia increase interest rates. The regulator's spokespeople suggest that even with rapidly growing wages and stable annual inflation within the 2–3% target, the need for extremely low interest rates will remain. According to the RBA, wages should soar by 3% in order to consider the possibility of monetary policy tightening. In the first quarter of 2021, the wage price index only grew by 1.5%.
Governor Philip Lowe says the central bank will not increase interest rates until inflation is within the 2–3% target. The governor stresses the importance of stronger wages growth and a return to full employment in Australia before considering any increase in the cash rate. This is unlikely to be until 2024 at the earliest. At the same time, Australia's inflation is expected to approach the 2% target only by mid 2023.
In this light, AUD is trying to reach its highs and consolidate at these levels. However, price jumps have not helped the aussie do so. At the same time, the currency has a good chance to continue its bull run.