Data from the United States had strong support for the US dollar against major currencies, which can probably serve as a noticeable decrease in expectations of a more radical change in the Fed's monetary policy.
According to the data presented, sales of new housing in March rose sharply to 692,000 compared to the February value of 662,000. At the same time, a decrease was expected to 647,000. In percentage terms, sales jumped 4.5% in March against 5.9% in February, but interestingly, they were expected to drop by 3.0%.
The promulgation of these really strong data has provided significant support for the US dollar at the general Forex against most major currencies. In our opinion, this is due to lower expectations that the Fed may not decide to start reducing interest rates in the second half of this year. In this situation, the main currencies will be in a clearly losing situation against the dollar since the central banks to which they belong (for example the RBA, the Central Bank of Canada and the like) are more likely to not only strive to maintain current interest rates but with a high probability to reduce them may begin. For example, it is already expected from the Reserve Bank of Australia and the Central Bank of Canada.
The Australian consumer inflation figures released today only strengthened this opportunity. The consumer price index in annual terms fell to 1.3% from 1.8%. It was assumed that it would fall to 1.5%. In the first quarter, the indicator showed no increase in inflation at all, remaining at zero. Other components of the indicator also showed a decline.
Today, the Central Bank of Canada will have a meeting. It is expected that the key interest rate will be kept at the same level 1.75%. From the session, markets expect the forecasts of the regulator to be in respect to the prospects for the economy of the country and also to interest rates. If the bank makes it clear that it can start lowering interest rates, the Canadian dollar will fall noticeably, despite rising crude oil prices.
It is possible that the local rally of the US dollar will continue today.
Forecast of the day:
The AUD/USD pair can be adjusted up to 0.7060 after a strong fall. We consider it possible to sell it, approximately from this level with targets at 0.7000 and 0.6980.
The USD/CAD pair may continue to grow if the Central Bank of Canada makes it clear that it will not raise interest rates or may even begin to lower them later this year. On this wave, the price can overcome the level of 1.3455 and rush to 1.3530.
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