The downtrend continues but is losing its intensity. Since March, the rates have fully consolidated in the range of 1.5360 - 1.5677 AUD. The consolidation of the rates became possible due to the strengthening of the euro this spring. Investors are optimistic about the acceleration of vaccination processes in the EU, and business activity in the manufacturing sector has reached its highest level in 24 years.
The optimism has gone beyond the EU: investors expect a rapid recovery in the global economy, commodity prices are rising, and this has begun to support the value of the AUD. However, the Australian dollar is under pressure due to weak macroeconomic reports on the Chinese economy, as well as a disappointing reduction in the trade surplus and low import/export growth rates that did not meet forecasts. The RBA meeting also did not support the value of the AUD, as the regulator maintained its current monetary policy and record low rates, without following the example of the Bank of Canada, which at least mentioned a possible tightening in the monetary policy in the foreseeable future.
Is it worth waiting for the completion of the consolidation and the strengthening of either the euro or the Australian dollar? Which of these currencies has a greater incentive to strengthen?
Next week, we expect new macroeconomic reports for the AUD: consumer sentiment in Australia, retail sales in March, and the consumer price index in China. The volatility will decrease. Therefore, we believe that the flat trend will continue. Most technical analysis tools point to the effectiveness of the deals to sell in the short term, in favor of the AUD. This makes some sense because the incentives for the growth of the euro have so far been exhausted.
So, our choice for today are the deals to sell. The entry points may also be the levels of 1.5360 and 1.5677, the breakout of which is still unlikely in the near future.
