Last week the Australian Dollar was under pressure due to the negative data on inflation in Australia. As it became known, the consumer price index in Australia fell to 0.6% in quarterly terms from the previous value of 0.8%. The currency pair AUD/USD, after the news, has lost 0.98% and was trading at 0.9274. Let’s recall that the rate of inflation remains one of the most important indicators, which reflects the rate of national economic recovery after the financial crisis of 2008.
At the moment, the fragile global economic`s recovery could be threatened by the development of deflation processes in the leading developed countries. For example, the extremely low rate of inflation in the Euro zone forced the representatives of the European Central Bank to reconsider the current monetary policy in favor of further easing, which will result in pressure on the single European currency. The overvalued Australian Dollar also affects the inflation in Australia, and it is possible that the RBA decision to maintain the refinancing rate at 2.50% will be reviewed at the next meeting of the Bank in favor of reduction, in order to minimize the deflationary pressure in the country.
The Bank of New Zealand will support the Australian Dollar
According to analysts of Forex Broker Company UFXMarkets, the overcoming of the psychological level at 0.9300 by the pair AUD/USD, indicates an increasing role of sellers in the pair dynamics. The sensitive issue for investors investing in Australian currency still remains the possibility of further reduction of the key rate by the Bank of Australia. If the decline in the inflation rate continues, there is a high possibility that the bullish scenario for the pair AUD/USD will be fully offset.
From the technical point of view, if the closing price of April on instrument of AUD/USD is above the mark of 0.9340, it will create favorable conditions for the further activity of the bulls, since in this case there will be testing of reversal patterns movement "double bottom." The aim for the bulls, with the implementation of this scenario, would be the level of 0.9700 or the parity with the U.S. Dollar. If the pair breaks the mark of 0.9200, it is likely to expect the rollback of the quotes of AUD/USD to the value of 0.9040 in May. A decision by the Bank of New Zealand may have a support to the Australian Dollar, which is to raise its key interest rate from the current value of 2.75% to 3.00%. At the time of writing the pair AUD/USD was at the mark of 0,9286.
The experts of Masterforex-V World Academy will keep on monitoring the dynamics in price of the currency pair AUD/USD.