18.04.201801:24 Forex Analysis & Reviews: AUD/USD: Long positions could lead to losses

The US dollar index continues to decline, approaching the March lows. The American currency continues to react to the actions of President Donald Trump, who yesterday made it clear that he adheres to the policy of a weak dollar. Against the background of other problems, this factor played the role of the "last drop", and the U.S. dollar dipped significantly across the market.

Some dollar pairs already have a price record for the year (for example, in a pound-dollar pair), while others react more restrainedly. In this context, we should pay attention to the AUD/USD pair- in this case long-term long positions may not justify themselves, as the Australian dollar continues to be under pressure of its own fundamental problems.

Today, during the Asian session, the Reserve Bank of Australia minutes was published. In general, this document did not present anything radically new. The regulator continues to exercise caution and restraint in its assessments. First, the central bank acknowledged that it is too early to talk about tightening monetary policy. Secondly, the RBA again took an aim at the exchange rate of the national currency - the overvaluation of the Australian dollar slows the growth of inflation, which already shows weakness due to the slow increase in wages and competition in the retail sector.

Also, the Australian central bank focused its attention on the high level of household debt. This problem is not new: last year the regulator sounded an alarm about this. In many regions of the country (especially in those cities where there is more dependence on the mining sector), the level of unreliable debts is growing, despite the significant tightening of credit conditions.

For example, at the end of last year, the ratio of household debt to income rose to a record level of 190%. The Australian banking sector began to raise mortgage rates (also increasing the loan-cost ratio), and as a result, lending in the country slowed. During their last meeting, members of the Australian regulator again worried about this problem, as the current situation reduces consumer activity, especially against the backdrop of weak wage growth.

In other words, the Reserve Bank of Australia has reaffirmed its commitment to a soft monetary policy, focusing on a number of problematic issues. The reaction to the published minutes was minimal: the market saw nothing new there, both in a bad and in a good context. In addition, the regulator "sweetened" the overall negative impression: the RBA confirmed that the next step of the central bank will be a rate hike. No one is yet speaking about the timeframe of the move, although most experts talk about mid-2019.

Thus, the Australian dollar has not received support from the RBA - moreover, the regulator clearly does not welcome the appreciation of the national currency. And this means that with a more or less large-scale growth of the AUD/USD, the central bank will use leverage, at least of a verbal nature.

The commodity market is also in no hurry to support the growth of the "Aussie". The rate of decline in the cost of iron ore has slowed, but the downward dynamics are still continuing. A ton of this raw material is currently estimated at $ 64.1, while at the beginning of the year this figure was at the level of 75-78 dollars. The price is under pressure due to the possible expansion of the US list of Chinese goods, which are subject to increased duties.

On Monday, Trump again criticized China's actions (already about the "deliberate devaluation" of the national currency), and Beijing, in turn, condemned the US actions in Syria. This suggests that the trade war is likely to continue in the very near future, putting pressure on the commodity market.

Indirectly, this is confirmed by today's statement of the official representative of the National Bureau of Statistics of China. According to the agency, the Chinese economy will continue its growth during the trade war with the US, as it is reoriented to domestic consumption.

This statement was made in connection with the release of contradictory data on China's GDP growth. On the one hand, the Chinese economy in the first quarter of this year increased by 6.8% compared to the same period last year. Positive dynamics was demonstrated by retail sales figures, export level, as well as an indicator of domestic consumption.

On the other hand, negative dynamics was recorded in the sector of foreign supplies and industrial production. In particular, the volume of industrial production reached a level of six percent, while experts expected growth to 6.4% (and the previous figure was at the level of 7.2%). In general, the data published today did not reflect the consequences of the trade conflict with the United States, but several "alarming bells" have already sounded.

Summarizing the above, it should be noted that, despite the weakening of the US dollar, the AUD/USD pair does not have sufficient arguments for large-scale growth. To confirm the upward trend, the bulls of the pair need to gain a foothold above the 0.7810 mark, breaking the resistance level corresponding to the upper line of the Bollinger Bands indicator on the daily chart. Otherwise, it is advisable to consider short positions from the boundaries of the 78th figure, with the first southern target of 0.7715, is the middle line of the Bollinger Bands indicator on D1.