The AUD/USD pair continues to approach the level of 0.7800, making rare attempts to break through it. However, as soon as the Australian dollar overcomes this level, it meets the resistance of the bears: traders open short positions, thereby exerting downward pressure on the pair. However, this is not surprising, since the growth of this instrument is due only to the weakness of the USD, while the AUD itself is under the background pressure from a lot of fundamental factors. In particular, the "dovish" rhetoric of the RBA members, as well as the ongoing political tension between Australia-China, do not allow the Australian dollar to be independent.
On the other hand, the latest release on the growth of the Australian labor market left a left a mixed impression: despite the decline in unemployment, the 90,000 increase in the number of employees was due solely to the growth of the part-time employment component, while the full employment component was in the negative area. It can be recalled that we are talking about the March data, when the state subsidy program JobKeeper was still in effect, which was used by about a million Australians. The government program ended at the end of last month, and this fact will inevitably affect the main indicators of the labor market, naturally in a negative way. According to experts, about 100 thousand Australian residents will lose their jobs in the coming months, mainly in the tourism industry and in the restaurant sector. Therefore, the Australian Nonfarm for April is likely to come out in the "red zone", reflecting the slowdown in the recovery process.
Anyhow, this data will be discussed in the second half of May. The release will take place after RBA's May meeting and the results of which will be announced next Tuesday. But tomorrow, the key data on the growth of Australian inflation will be published. If this release also disappoints, the AUD/USD pair will at least move under the 0.7750 mark, which corresponds to the lower border of the Kumo cloud and coincides with the Tenkan-sen line on the daily time frame.
According to preliminary forecasts, the overall consumer price index in the first quarter of this year will show a slight decline in quarterly terms (from 0.9% to 0.8%) and a significant increase in annual terms (from 0.9% to 1.4%). Compared to the same period a year ago (the truncated average method), the index should show minimal growth – both on an annual and quarterly basis. If these indicators fall slightly short of the forecast levels, the Australian dollar will be under significant pressure, especially ahead of the RBA's May meeting.
In addition, it is worth noting that tomorrow is also an important day for the US dollar. We will learn not only the results of the April meeting of the members of the US regulator, but also listen to the speech of the US President in Congress. Based on experts' general opinion, the Fed's next meeting will be ignored: the Central Bank will leave all the parameters of monetary policy unchanged, and Powell will voice those theses that he already stated previously, namely about maintaining a wait-and-see attitude.
But as for Joe Biden's speech, it is difficult to predict the reaction of dollar bulls. According to the American media, the president plans to sharply raise taxes for rich fellow citizens. If Congress approves Biden's proposal to raise the top rate of income tax and capital gains tax, it would be the steepest increase in taxes on investment income since the 20s of the last century. However, this information is exaggerated in the media through rumors. If Biden announces a more acceptable version of tax reform tomorrow (in the context of hypothetical approval by both houses of Congress), the US dollar will surge all over the market. However, if he confirms the published rumors, the national currency will be under pressure again.
From a technical viewpoint, the AUD/USD pair managed to break through the resistance level of 0.7780, which corresponds to the upper border of the Kumo cloud on the daily chart. The controversial release on the growth of the Australian labor market cancels the pair's upward impulse, but the weakness of the US dollar keeps the Australian dollar afloat. Given this fact, it can be assumed that in the the AUD will follow the USD in the medium term, reacting to the growth or decline of the US dollar index.
The publication of inflation data tomorrow will act as a "resonator", strengthening or silencing the influence of the dollar on the dynamics of AUD/USD. If the indicators moves into the "red zone" with the general weakness of the US dollar, the pair may remain in the range of 0.7750-0.7800. But if the US dollar feels support amid tomorrow's events (Fed meeting and Biden's speech in Congress), then the disappointing inflationary release will exert strong downward pressure on the AUD/USD pair: it may find itself at least at the base of the 77th figure. Meanwhile, short positions can be considered with the first short-term target of 0.7750 (lower border of the Kumo cloud, coinciding with the Tenkan-sen line on the daily chart). The main target is located slightly lower, that is, around the level of 0.7700 (middle Bollinger Bands line, which coincides with the Tenkan-sen line on the same time frame).
