Australian Dollar, AUD / USD, RBA, Kent, NZD / USD, RBNZ – hotspots
- The Australian Dollar started higher on the Monday after the election
- The change of government has so far had little effect on economic prospects
- Together with the RBNZ, the RBA is tightening. Where AUD / USD?
The Australian dollar began a week after the change of government in the federal election in Australia.
The Labor Party will replace the Liberal National Coalition, but at this stage it is unclear whether they will lead or whether they will need to form a minority government.
The two main parties campaigned centrists with key differences in policy on climate change and the establishment of a national anti-corruption observer. The economic effect is considered to be quite minimal.
Wider risk sentiment ahead of Monday’s opening initially raised stock markets and related currency risks such as the Australian and Kiwi. The shares have since given up their earnings.
Today at the Debt Summit in Sydney Reserve Bank of Australia Assistant Governor Chris Kent confirmed that the RBA will not reinvest bond yields with maturity.
These are bonds that were accumulated during the quantitative easing (QE) program of banks in response to the pandemic. Allowing ties to slide is a quantitative tightening (QT).
If the need arises, the bank can tighten by selling bonds on the market until they are repaid.
Although the market expected such actions, it further underscores the desire of banks to curb loose policies in the face of accelerating inflation. At their meeting earlier this month, they raised the cash rate by 25 basis points.
Recent data show that by the end of the first quarter, the CPI is 5.1% year on year, well above the target range of banks by an average of 2-3% over the business cycle. The April unemployment rate reached a 48-year low of 3.9%.
Conditions are ripe for tightening, and at their June meeting at the June meeting, the market raised prices by 25 basis points. An increase of 40 basis points cannot be ruled out.
In the vicinity of RBNZ gather on Wednesday, and the market expects them to grow by 50 basis points.
AUD / USD TECHNICAL ANALYSIS
AUD /USD bounced back from a recent 2-year low but remains within the channel of the downtrend.
The bearish momentum seems to have stopped with the price crossing above the 10-day mark simple moving average (SMA)and may be about supporting movement above the 21-day SMA.
Laying medium and long–the term bearish momentum may continue to develop if the price remains below the 55-, 100- and 260-day SMA.
Support may be at a recent low of 0.6829, and resistance may be at a recent peak of 0.7265.
Diagram cpublished in TradingView
AUD / JPY TECHNICAL ANALYSIS
After reaching a 7-year high of 95.74 last month AUD /JPY returned to a low of 87.30 and has since consolidated.
It may face 50% resistance Fibonacci rollback the level of this total movement is 91.50.
On the 21st and 55th day there may also be resistance simple moving average (SMA)
which are currently 90.99 and 90.88 respectively.
Support may be at the last low of 87.30 or historical levels of 86.26 and 86.07
Diagram cpublished in TradingView
— Written by Daniel McCarthy, strategist for DailyFX.com
To contact Daniel, use the comments section below or @DanMcCathyFX on Twitter
https://www.dailyfx.com/forex/fundamental/article/special_report/2022/05/23/Australian-Dollar-Lifted-by-Risk-On-Environment-Post-Election-As-Labor-Win-Office.html
