AUD/USD turned bullish at the beginning of this year, as it bounced off the support area below 0.70. It pushed above all moving averages and reached 0.76.60 in the first week of this month, but it started reversing back then and has been retreating lower since then. The price hovered around the 20 SMA (gray) on the daily chart, but the decline resumed again.

One of the main reasons is the fact that the risk sentiment in financial markets has deteriorated since the beginning of the conflict in Ukraine. The other factor is the FED turning quite hawkish. The FED has started to increase interest rates and is turning even more hawkish now, as inflation keeps surging in the US, reaching 8.5% in March. The Reserve Bank of Australia has also turned hawkish, but it is way behind the FED in this regard and they’re still keeping interest rates at 0.10%. Today’s minutes from the last meeting showed that the RBA is drifting toward a rate hike, but that’s still too slow compared to other major central banks, which should leave the AUD bearish.

AUD/USD Daily Chart – Heading Toward the 200 SMA

The bullish move is over now for the Aussie

Reserve Bank of Australia April meeting minutes

• inflation had picked up and a further increase was expected, with measures of underlying inflation in the march quarter expected to be above 3 per cent.
• Australian economy had remained resilient and spending was picking up following the setback caused by the outbreak of the omicron variant
• wages growth had also picked up but, in aggregate terms, had been below rates likely to be consistent with inflation being sustainably at the target.
• strength of the Australian economy was evident in the labour market
• these developments have brought forward the likely timing of the first increase in interest rates.
• over coming months, important additional evidence will be available on both inflation and the evolution of labour costs
• members noted that higher prices for petrol and other commodities would result in a further lift in inflation over coming quarters
• members agreed that financial conditions in Australia remained highly accommodative

The comment on wages growth points to an RBA still without a sense of urgency to hike the cash rate.

Link to full text:

Minutes of the April 2022 Monetary Policy Meeting of the Reserve Bank Board

AUD/USD Live Chart