The Australian dollar paired with its American counterpart is moving around the level of 0.7750. And if the AUD showed increased volatility at the beginning of the week, then over the last two days, the AUD/USD pair actually stayed in one place, trading in a narrow price range. This is partly due to the half-empty economic calendar – the most important releases in Australia were published during the previous two weeks. However, the main problem of the AUD/USD pair is the indecision of both buyers and sellers, since the fundamental factors that lead the Australian dollar in one direction or another have a temporary impact. And although the US currency is under background pressure, the AUD/USD bulls are not in a rush to take advantage of the situation.
The last upward movement of the pair was seen the day before yesterday when traders sharply reacted to the results of the Reserve Bank of New Zealand meeting. It can be recalled that the New Zealand regulator has voiced rather hawkish rhetoric. First, the Governor of the Central Bank, Adrian Orr, announced that the stimulus program will be completed by June 2022. Secondly, he hinted that the issue of raising the interest rate will be discussed in the second half of next year.
In general, Orr became the first among the heads of the Central Bank of the leading countries of the world, who very transparently announced the tightening of monetary policy. And although we are talking about long-term prospects, traders of NZD/USD reacted to this fact with an impulse growth of the pair.
The resonant meeting also affected the dynamics of the Australian dollar: the Australian dollar surged to the borders of 0.78 mark. The RBNZ's "hawkish" stance has led many to say that the RBA will follow suit. Abstracting from the question of the correctness of such a comparison, it can be noted that such correlations actually took place. But first, it was the RBNZ that followed the RBA (and not vice versa) in most cases. Second, it is still impossible to talk about an established relationship, and third, the last meeting of the Australian regulator, which took place recently, was held in a "dovish" manner. All these factors led to the disappearance of the upward momentum of the AUD/USD pair. Thus, buyers did not even test the impassable level of 0.78.
It is worth noting that this was the only relatively massive price surge this week, after which the pair went weak, fluctuating within the 20-point price range and circling around the 0.7750 mark.
This caution is primarily due to the fact that the Reserve Bank of Australia will hold its next meeting next Tuesday (June 1). After this, the regulator will assess the latest trends in the country's economy, including the latest data on the labor market. Recall that the Australian Nonfarm data, published last week, left a double impression. On the one hand, the unemployment rate fell to 5.5%. The indicator has been declining for six consecutive months and reached the lowest level since March 2020. However, it should be considered here that the unemployment rate refers to quite fragile and lagging indicators, while more timely data signal a slowdown in the growth of the labor market. For example, the increase in the number of employees in April slip by 30 thousand. This indicator went into the negative area for the first time since September last year when Australia was covered by the second wave of the coronavirus pandemic. In addition, the dynamics of wage growth remain quite weak.
The aforementioned data should be viewed through the prism of the prospects for adjusting the parameters of monetary policy. According to RBA's earlier statements, the issue of extending the bond purchase program and the need to change the switch to bonds with maturity in November 2024 will be addressed this summer.
From a technical point of view, the situation is as follows. It can be noticed that almost all trend indicators indicate uncertainty. On the daily chart, the AUD/USD pair is in the Kumo cloud, but under the Tenkan-sen and Kijun-sen lines. The price is also located between the middle and lower lines of the Bollinger Bands indicator, which indicates a downward pressure. To talk about the prospects for the development of the upward trend, AUD/USD buyers need to get out of the Kumo cloud and consolidate above the level of 0.7785 (Kijun-sen line). In this case, the Ichimoku indicator will form a bullish "Line Parade" signal, opening the way to the main resistance level of 0.7850 (upper line of the Bollinger Bands on the same time frame). In turn, the bears need to break through the level of 0.7700 and consolidate under the 0.7690 level (lower border of the Kumo cloud, which coincides with the lower line of the Bollinger Bands indicator). If so, we can talk about the development of the downward trend, which will return the pair to the range of 0.7550-0.7650, within which it was traded from the end of March to mid-April.
It is advisable to take a wait-and-see attitude at least until next Tuesday, when the results of the June meeting of the Australian regulator's members will be announced, due to the current fundamental background, the uncertain technical picture, and the proximity of the RBA's June meeting.