AUD/USD Chart Flags Bullish Potential as RBA Nears Amid China Lockdowns

AUSTRALIAN DOLLAR, AUD/USD, RBA, CHINA, COVID, UKRAINE, BULL FLAG - TALKING POINTS

Asia-Pacific traders watch Ukraine, China lockdowns, central banks to start off the week
The Reserve Bank of Australia's policy meeting is under the spotlight as traders attempt to predict when interest rates will begin to climb.
If the Flag pattern barrier is breached, the AUD/USD price might reach its all-time high in October 2021.

MONDAY’S ASIA-PACIFIC OUTLOOK

The Australian Reserve Bank's interest rate decision, which will be announced tomorrow, will be the focus of the Asia-Pacific markets to start the week. The Reserve Bank of Australia (RBA) is likely to keep interest rates unchanged at 0.1 percent, although expectations for a rate increase in the second half of the year have grown in recent weeks. As a result of these predictions, the yield on Australia's 10-year bond has risen by about 100 basis points in only four weeks, according to Bloomberg. It is now trading just around 3.0 percent, which is the highest level seen since May of this year.

Although economists are divided on when the Reserve Bank of Australia would raise interest rates for the first time in more than a decade, the vast majority believe it will happen at the June, July, or August meeting. The Australian Dollar has taken advantage of these hawkish attitudes, with the currency rising in value compared to its main counterparts over the first three months of this year. In addition, the next 2022 Australian federal election, which is scheduled to take place in May, complicates predictions of a rate increase. Lowe, the governor of the Reserve Bank of Australia, may prefer to maintain the interest rate constant so close to an election.

The Melbourne Institute's inflation measure for March will be released this morning, followed by a final reading on February retail sales and a report on March job adverts from ANZ Bank later in the morning. A strong showing in those data prints may contribute to the strengthening of the Australian Dollar. Later today, India will release its manufacturing purchasing managers' index (PMI) data for March, while Thailand will release its business confidence data for the same month.

As the situation in Ukraine rages and suspicions of war crimes mount, crude oil prices are likely to stay under careful scrutiny for the foreseeable future. Covid outbreaks in China have shut down key financial centers such as Hong Kong and Shanghai, and the number of cases continues to rise despite the limitations. A sustained period of stock market closures might have a negative impact on the Chinese stock market, especially at a time when the rest of the world is easing its economic sanctions on the Chinese people. Following last week's announcement of a supply release from the United States' strategic reserves, demand-sensitive oil prices fell somewhat.

AUD/USD TECHNICAL FORECAST:

Following many weeks of increases, the AUD/USD traded in a range last week. That movement has resulted in the formation of a Bull Flag pattern, which may herald the beginning of future advances. If prices are able to break beyond flag resistance, they might reach new highs as early as 2022. Resistance might be found at the 0.7556 level, which was reached in October 2021. In the alternative, a break below Flag support might bring the 78.6 percent Fibonacci level at 0.7430 into sharp view. Following that is the 61.8 percent Fib at 0.7331.