Inflation Fails to Ease! AUD/USD Extends Downtrend

Summary:

The resilience of the Australian Dollar (AUD) is partly attributed to persistent hawkish sentiment, as the Reserve Bank of Australia (RBA) faces a severe stagflation dilemma.

SELL AUDUSD

EXP

TRADING

0.69386

Entry Price

0.67000

0.71500

0.69159 -0.00302 -0.43%

0.0

Pips

Flat

0.67000

Exit Price

0.69386

Entry Price

0.71500

Fundamentals

Market judgment regarding the inflation outlook is also reflected in monetary policy expectations. Westpac Chief Economist Lucy Ellis anticipates that as the impact of soaring energy prices gradually transmits to CPI data, Australia's headline inflation rate could rise to around 5%. Capital Economics economist Abhijit Surya argues that the slight retreat in February inflation does little to alleviate the RBA's concerns regarding upside risks, and the rationale for further tightening monetary policy remains compelling. Elias Haddad from Brown Brothers Harriman & Co. further notes that, despite February inflation coming in slightly below forecast, rising energy costs will likely accelerate price pressures in Australia. Markets have now priced in a 65% probability of a 25-basis-point hike to 4.35% in May. This assessment aligns with the RBA's statement last week: the central bank explicitly warned that "inflation is likely to remain above target for some time and that the risks have tilted further to the upside," and acknowledged that Middle East tensions could exacerbate global and domestic inflationary pressures across multiple scenarios.

Technical Analysis

From a 4-hour perspective, Bollinger Bands are opening downwards, and moving averages are diverging to the downside, with price oscillating downward between the Bolling Middle and Lower Bands. The MACD lines are on the verge of forming a golden cross, and bearish momentum is waning, indicating the trend remains intact, but a minor rebound is possible. The RSI reading is 38, indicating that the market is in oversold territory. Support lies near the EMA800. Daily, Bollinger Bands are opening downwards, and moving averages are diverging to the downside, signaling the start of a bearish phase. The MACD lines have broken below the 0 line, and the death cross continues to extend. The RSI stands at 42, with lower highs forming progressively. In the short term, the price is highly likely to fall towards the EMA200 and a key psychological level, specifically 0.673 and 0.690. Consequently, it is recommended to sell at highs.

Inflation Fails to Ease! AUD/USD Extends Downtrend_1

Inflation Fails to Ease! AUD/USD Extends Downtrend_2

Trading Recommendations

Trading direction: Sell

Entry Price: 0.695

Target Price: 0.67

Stop Loss: 0.715

Support: 0.63/0.68/0.67

Resistance: 0.715/0.737/0.75

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Inflation Fails to Ease! AUD/USD Extends Downtrend

Risk Disclosure