The AUD/USD pair gained slight support from the Chinese data during the Asian session on Wednesday. Today, China published its manufacturing and non-manufacturing PMIs for March. Both indicators came out in the "green zone", reflecting the recovery of the world's largest economy and Australia's largest trading partner. This fact allowed the AUD/USD bulls to leave this week's local lows, that is, from the level of 0.7585. However, it is a formal corrective pullback – the upward "micro-impulse" faded after a 30-point price surge and the pair was under pressure again. The US currency has recently been strictly controlling the situation for the pair, immediately stopping corrective impulses.
This pair has been actively within the downward trend for the past month. If we analyze the weekly chart, the Australian dollar made an unsuccessful attempt to reach the level of 0.80 at the end of February, after which the price gradually declined. Unlike many other currency pairs, the AUD allows itself to make wide upward pullbacks, although the USD has not let it move further than 50 points for the last two weeks. Nevertheless, such a price distance also allows you to open short positions at a more favorable price. It is advisable to use any attempts at corrective growth as an excuse to go into sales despite the counter attacks of AUD/USD buyers. The overall domination of the US dollar will not allow its Australian counterpart to take control at least not in the near future.
The US dollar index has recently been updating the highs of the current year almost daily – just today, the indicator reached 93.44, which is the maximum value since the beginning of November 2020. The yield of 10-year treasuries also continues to rise, approaching the mark of 1.8%. Some experts believe that the indicator will surpass the psychologically important 2% target in the second half of this year. It is worth noting that such dynamics are caused by a combination of a whole complex of fundamental factors. The implementation of a 1.9 trillion-dollar fiscal stimulus package, the development of a new economic plan (the volume of which can reach $4 trillion), the growth of US key macroeconomic indicators, the success of the campaign to vaccinate Americans, and lastly, the monopoly of the Democrats in the chain of legislative initiatives. Perhaps, these are the main factors that support the US currency. In turn, the Aussie cannot boast such a set of fundamental factors, which disappoint AUD/USD buyers. All this suggests that the pair will continue to be under pressure, and will most likely rise in the near future.
Two events are currently in focus. First, we have the presentation of the US president for the new economic plan. Second, the data on the growth of the US labor market will be released. Today, the head of the White House will present the first part of the new budget spending plan. This is an ambitious infrastructure project that includes large-scale investments in road construction and other infrastructure programs. The second part of the economic plan, which involves funding for health care and support for child care and providing additional assistance to Americans affected by the pandemic, will be presented approximately at the end of April. According to influential Democratic congressmen, there is 90% probability that the plan will be approved, which is likely to be broken down into several legislative elements.
However, the Republicans have already announced that they will vote against this initiative. They compare this project to a "Trojan horse", since it also involves increasing taxes for Americans along with infrastructure projects. Indeed, the White House is considering raising the corporate tax to 28%, as well as a minimum tax on the income of companies abroad. In addition, the Biden administration may initiate a tax increase for those Americans whose family income is at least $ 400,000 a year.
So while Republicans oppose a new economic plan, Democrats can follow the path by using a budget reconciliation mechanism, similar to the case of the 1.9 trillion package, in which Congressmen can pass the bill with a normal majority of votes. It should be recalled that Democrats recently controlled both houses of Congress.
Therefore, the new budget spending plan has great potential, which has a very high approval rate within the next six months. Today's "presidential presentation" of the economic plan can seriously strengthen the position of dollar bulls.
In terms of the US Nonfarms, the unemployment rate in March is expected to decline to 6.0%, and the growth rate of the number of employed may surge by 630 thousand. If the real figures coincide with the forecast, the US dollar will increase again.
Therefore, the current fundamental background for the AUD/USD pair indicates that short positions is the priority. The nearest downward target is set at 0.7550 (lower line of the Bollinger Bands indicator on the daily chart). At the same time, trend indicators signal the further decline: On D1 chart, the price is located between the middle and lower lines of the Bollinger Bands indicator, and the Ichimoku indicator has formed a bearish signal "Parade of Lines". The main downward target is the level of 0.7500 – Kijun-sen line on the weekly chart.
