Aussie dollar trend forecast: Aussie dollar / US dollar may fall further, the reason is here!

Fundamentals of the Aussie dollar: neutral

Although CPI is hot, the performance of AUD / USD is still disappointing; If the RBA is hawkish, it is expected to provide a good push for the AUD / USD;

However, the Federal Reserve's potential interest rate hike of 50 basis points may dampen sentiment and hurt the Australian dollar.

Following the strong performance in February and March, the Aussie dollar / US dollar trend recorded its worst month since November 2021.

Traders seeking to take advantage of Australia's hot first quarter CPI (consumer price index) may face disappointment.

Australia's first quarter truncated average CPI exceeded the central bank's inflation target, helping to ease volatility.

The following reasons may help explain why the AUD / USD may fall in the next few days or even weeks, thus opening the door for further action.

AUD / USD is still falling even though the advantage of us short-term bond yields over Australia is gradually fading. In most cases, the expected rise in interest rates will help the currency appreciate.

This is where things start to get tricky. In financial markets, the Australian dollar is also linked to risk sentiment. This means that the Aussie dollar may sometimes change with changes in global risk appetite sentiment.

In view of this, the Australian dollar seems to focus more on the decline of SP500 recently, which has peaked since April. When risk appetite subsides, it is also a dazzling moment for the dollar linked to risk aversion.

Will the Bank of Australia (RBA) bring "joy" to the Australian dollar this week?

The Aussie dollar's hot inflation further boosted RBA's hawkish monetary policy expectations.

According to Bloomberg, at present, the market is betting that RBA may raise interest rates by 60%, which means that RBA may announce an increase in the official cash rate from the current 0.10% to 0.25% in its resolution on Tuesday.

By the end of this year, the market expects RBA to raise interest rates about 10 times in total.

As mentioned above, the fragile emotional environment may easily make the potential rally of RBA for AUD / USD disappear.

The market also expects the Federal Reserve to raise interest rates by 50 basis points and may soon reduce its balance sheet to $9trillion.

Therefore, traders should be cautious about any rise in the Australian dollar. The potential risk of further cooling of risk appetite makes the fundamental outlook of the Australian dollar trend tend to be neutral.