The Australian central bank’s monetary policy statement announced that the exercise price of the Australian dollar/dollar expiry option may provide some hints for investors; the IG customer sentiment index shows that the outlook for the Australian dollar/dollar is still unclear.
AUD Fundamental Outlook
The RBA released its monetary policy statement, and the following are the key issues:
1. Inflation expectations have been raised, and inflation is expected to remain above the 2%-3% range.
2. There is no need to worry about the weakening of the Australian dollar, which is currently trading around similar levels in early 2022 and before the epidemic.
3. The labor market is tight and the unemployment rate is low.
Australia’s unemployment rate
Chart source: RBA official website
4. Rate hikes are needed to curb inflationary pressures
5. Downgrade of China’s economic growth forecast
Taking into account the above points, the Australian dollar has received a lot of upside support; if China’s economic growth resumes, then AUD/USD may lead the future. Few currencies have shown strong resilience against the dollar, and even fewer have solid economic fundamentals below aggressive rate hikes.
The plans for the following options expiring today focus on exercising at 0.7200 and 0.7300, respectively. This could strengthen the Aussie; the market tends to move towards higher strike levels as expiration approaches (this is known as a rule of thumb).
AUD/USD: 0.7000 (524 million), 0.7100 (908 million), 0.7200 (972 million) and 0.7300 (227 billion)
AUD/USD technical analysis
The daily AUD/USD chart above shows the bears making a third attempt to test the psychological support area of 0.7000 since December 2021. Given the dollar’s buying and the improbability of a quick recovery in China’s economic growth, that’s a real possibility in the short term. I will be looking for confirmation of a break above 0.7183 (61.8% Fibonacci level) to confirm the resumption of downside momentum. If the pair approaches the 0.7183 resistance level, this could be a good place for the bears to re-enter.
200-day SMA line (grey line) 0.7183
(Translated by Ashley by Warren Venketas)
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