Australian Dollar Slides Amid RBA Comments and Inflation Surprises
31 May 2023
So far, this week has been less than stellar for the indices. Although there was a strong opening, the consecutive bearish candles seen today indicate a growing appetite among sellers. While the SP500 manages to hold above the critical support around 4190, the selling pressure is on the rise. The Dow Jones, after an initial bounce off the lower line of the triangle, is approaching this support once again, and it's important to note that a breakout here could have severe consequences. In Europe, there is a significant technical development on the CAC, as it is currently breaking a major uptrend line, signaling a potential selling opportunity. The DAX is also facing challenges and a further decline towards 15670 seems increasingly likely.
In the Forex market, the American Dollar continues to strengthen, with the EURUSD aiming for new mid-term lows. USDCHF is attempting to rise above the 0.907 resistance level, which would be a notable achievement. Additionally, the price is currently establishing long-term highs. During the Asian session on Wednesday, we witnessed a strengthening of the Japanese Yen, even against the USD. Most pairs involving the JPY indicate a bearish correction signal.
Furthermore, the Australian Dollar has experienced a decline in value. Firstly, there were comments from RBA's Lowe, stating that monetary policy remains in restrictive territory and that their decisions are not driven by a single variable. He emphasized that central banks cannot afford to let inflation exceed the target beyond mid-2025. Later, we saw inflation numbers that came in negatively, rising to 6.8%.
The impact of the USD movement is definitely impacting the price of oil, which is sharply dropping and effectively ending its recent bullish correction. However, the stronger USD does not pose a threat to precious metals, as gold and silver are climbing higher. If they manage to finish the week on a positive note, there is a significant chance of a larger bullish correction.
In terms of today's calendar, aside from the data from Australia, we also have CPI numbers from Germany and GDP figures from Canada. The day will conclude with the release of JOLTS Job Openings data from the US.