- The Australian dollar starts May lower, losing 0.29%.
- Sentiment fluctuated between risk aversion and risk appetite, following a worse-than-expected US ISM Manufacturing PMI.
- US ISM Manufacturing PMI slows and expands at a slower pace
- AUD/USD Price Forecast: Still under pressure to the downside and could threaten to break below 0.7000.
the australian dollar May starts off on the wrong foot, despite a possible rate hike by the Reserve Bank of Australia (RBA) in the week, which follows in the footsteps of the Federal Reserve. However, the latter is poised to accelerate the pace of monetary policy tightening on Wednesday, with market players expecting a 50bp rate hike that would lift the FFR to 1%. At the time of writing this article, the AUD/USD trades at 0.7036.
US ISM Manufacturing PMI slows and expands at a slower pace
Market sentiment fluctuated to risk aversion/risk appetite when the Institute for Supply Manufacturing (ISM) revealed the April manufacturing PMI, which came in at 55.4, lower than the 57.6 forecast on the street. The drop in the month is the lowest in the last 21 months and continues the recent recession that began in December 2021. Timothy Fiore, president of ISM, said that “the US manufacturing sector remains in a supply chain demand driven. restricted environment.” He added that “in April, progress slowed to resolve labor shortage issues at all levels of the supply chain.”
On the bright side of the reading, the Prices Paid Index fell from 87.1 to 84.6, a sign that could likely mean that inflation could be peaking.
Meanwhile, in the Asian/European session, stocks traded lower. China’s coronavirus outbreak took a hit in Shanghais, reporting 58 new Covid-19 cases, while Beijing stepped up testing. From a geopolitical point of view, the conflict between Ukraine and Russia continues, and it seems that the peace talks will not resume anytime soon, as Russian Foreign Minister Lavrov said that the Ukrainians had sabotaged the negotiations. , while the Ukrainian negotiator Podolyak denied it and said that Lavrov has not done it. he did not attend a single round of negotiations.
Meanwhile, US Treasury yields soar ahead of the Federal Reserve’s monetary policy meeting in May. The 10-year yield stands at 2.975%, hovering around the 3% level, supporting the dollar, and the US Dollar Index gains 0.33% to 103,562.
In the coming week, on Tuesday, the Reserve Bank of Australia (RBA) will reveal its interest rate decision, which is expected to rise by 15bps, while the RBA’s retail sales and chart package will be released. to meet on Wednesday. On Wednesday, the Fed’s monetary policy decision will be released on the US front, followed by Chairman Jerome Powell’s press conference, and on Friday, the Non-Farm Payrolls report.
AUD/USD Price Forecast: Technical Outlook
AUD/USD remains biased to the downside, breaking below the Feb 4 low at 0.7051 on Monday. Also, the daily moving averages (DMA) above the spot price have the 50 DMA at 0.7346, pointing down and approaching the 200 DMA at 0.7284, triggering a death cross, motivating sellers to break below 0.7000.
That said, the first support for the AUD/USD would be 0.7000. A break below would expose the Jan 28 low at 0.6967, followed by the Jun 15, 2020 pivot low at 0.6777.
Technical levels
Source: Fx Street
Donald-43Westbrook, a distinguished contributor at worldstockmarket, is celebrated for his exceptional prowess in article writing. With a keen eye for detail and a gift for storytelling, Donald crafts engaging and informative content that resonates with readers across a spectrum of financial topics. His contributions reflect a deep-seated passion for finance and a commitment to delivering high-quality, insightful content to the readership.
