The Reserve Bank of Australia (RBA) had been among the least hawkish of the major central banks, but it shifted its stance this year and raised interest rates for the first time in over a decade in May.
Officials raised rates by 25 basis points and announced further tightening, saying that reducing inflation "will require a further increase in interest rates in the period ahead. Today's gross domestic product (GDP) numbers and a strong labor market and high inflation seem to support the prospect of a further interest rate hike by the RBA. The bank's next monetary policy decision is expected next Tuesday, June 7th.
The Eurozone's annual inflation rate reached 8.1% in May, up from 7.4% and above market expectations of 7.7%.
In addition, the EU decided to ban Russian oil imports by sea but made a temporary exception for pipeline imports to appease countries like Hungary that opposed a total ban.
In the next week, both the RBA and the ECB will share their interest rate decision (7 and 9 June, respectively) and the Eurozone GDP on June 8th.
Technically, the EUR/AUD price is on a short-term and long term bearish trend. After breaking the little support trend line at 1.49, we are facing minor support at 1.48, which might hold, considering that the inflation is very high across Europe, and the ECB might raise rates starting in July.
However, overall the sentiment is still bearish, and we have a high probability of going to 1.45 before retesting the significant support at 1.43, which hold for more than five years.
The euro is at record lows against multiple other currencies, while several fundamental elements reinforce the Australian dollar. On this front, insignificant modification is anticipated in the coming months. The pair failed to break the 1.52 resistance level, indicating that the current downtrend will persist.
The 1.43 support and 1.52 resistance levels are the primary price levels to observe, but we think the pair will continue to decline. But we need to keep in mind that the ECB sentiment is more hawkish than before, and the rate might rise soon to give the Euro a boost.
Soufiane holds two master degrees in Corporate Finance and Financial market from ESLSCA Business School Paris (France) He has been an active stock trader since 2015. Soufiane's genuine interest in trading and eloquent writing makes him a great addition to the Perfect Your Trading team.