AUD a buy on dips as multiple factors buoy outlook
May 21 (Reuters) -The Australian dollar lookspoised to outperform its peers as divergingcentral bank interest rate expectations, surging prices for base and precious metals and carry-tradedemand work in its favour.
The Aussie is hovering near highs traded in early January versus the U.S. dollar, euro and sterling after ReserveBank of Australia Governor Michele Bullock's warning of inflation risks and the government's fiscally expansionary budget forcedinvestors to push back rate-cutexpectations.
A quarter-point RBA rate cut is close to fully priced only in April 2025 - much later than othermajor central banks. Interest rate futures implya 73% chance of a U.S. Federal Reserve rate cut by September, while a Bank of England cut is almost priced in for August, and the European central bank has all but promised a cut on June 6.
The minutes of the RBA'sMay policy meeting on Tuesday are also likely to reaffirm its higher-for-longer rate stance and provide a boost for the AUD.
Surging prices for commodities, particularly copper, iron ore, gold and silver, and rising optimism on China's growth outlook are clearly AUD-positive.
The Aussie will also find underlying support from purchases versus the Japanese yen as the yawning Australia-Japan yield gap encourages carry trades.
AUD/USD faces resistance at 0.6731-51, a cluster of previous highs in January and the 76.4% Fibonacci retracement of its December-April drop. A decisive break opens a rally to 0.6838, the 2024 high. Supports are at 0.6645-50 and 0.6590-0.6600.
For more click on FXBUZ
Krishna Kumar is a Reuters market analyst. The views expressed are his own. Editing by Sonali Desai
Related Assets
Latest News
Disclaimer: The XM Group entities provide execution-only service and access to our Online Trading Facility, permitting a person to view and/or use the content available on or via the website, is not intended to change or expand on this, nor does it change or expand on this. Such access and use are always subject to: (i) Terms and Conditions; (ii) Risk Warnings; and (iii) Full Disclaimer. Such content is therefore provided as no more than general information. Particularly, please be aware that the contents of our Online Trading Facility are neither a solicitation, nor an offer to enter any transactions on the financial markets. Trading on any financial market involves a significant level of risk to your capital.
All material published on our Online Trading Facility is intended for educational/informational purposes only, and does not contain – nor should it be considered as containing – financial, investment tax or trading advice and recommendations; or a record of our trading prices; or an offer of, or solicitation for, a transaction in any financial instruments; or unsolicited financial promotions to you.
Any third-party content, as well as content prepared by XM, such as: opinions, news, research, analyses, prices and other information or links to third-party sites contained on this website are provided on an “as-is” basis, as general market commentary, and do not constitute investment advice. To the extent that any content is construed as investment research, you must note and accept that the content was not intended to and has not been prepared in accordance with legal requirements designed to promote the independence of investment research and as such, it would be considered as marketing communication under the relevant laws and regulations. Please ensure that you have read and understood our Notification on Non-Independent Investment. Research and Risk Warning concerning the foregoing information, which can be accessed here.
