Author: Mr.Amar – Technical Analyst

Even the Reserve Bank of Australia is not sure how sustainable the surge in inflation will be as a result of the Russian invasion in the Ukraine war. This is of little help to households who are already concerned about the pressure on the cost of living, as rising gas prices alone will weigh on their budgets.  ANZ-Roy Morgan’s weekly consumer survey showed inflation expectations rose 0.4 percentage points to 5.6 percent, the highest since November 2012. Inflation expectations can themselves create price pressures as workers demand higher wages to compensate. Some economists expect annual inflation could reach 5%, compared to 3.5% today.

The Australian dollar has taken a hit in recent sessions as negative risk sentiment took hold at the same time as commodity markets tumbled. AUD/USD hit 0.74410 high last week as commodities markets made new highs. Since then, many of those gains have declined, particularly in the energy sector. The resurgence in the spread of Covid19 is causing several major cities to go into lockdown as authorities pursue their zero-case policy. The RBA minutes for their March meeting were released today and there were no surprises there. The RBA said the members noted that labor market conditions were the tightest since 2008 and the outlook remained positive. Australia’s jobs figures are due out on Thursday and the market expects 37,000 jobs to be added in February and a modest drop in the unemployment rate to 4.1%.

Technically, a clear downside break of an up-sloping trend line from late January around 0.71800 at the latest combines with bearish momentum signals to steer AUD/USD sellers towards early January lows near 0.71300 and 0.71000 thresholds. In contrast, the uptrend channel remains in place although the price is about to break below the lower border.