- The Australian Dollar falls to 0.6452, after higher-than-expected US retail sales showed strong consumer activity.
- Rising US Treasury yields suggest declining hopes for Federal Reserve rate cuts, changing market expectations.
- Tensions in the Middle East and upcoming Chinese economic data will shape the trajectory of AUD/USD in the short term.
The Australian Dollar extended its losses against the Dollar during the North American session, falling around 0.08% after reaching a daily high of 0.6493. The AUD/USD pair is trading at 0.6452 following the release of strong US retail sales data.
US Dollar weakens after strong economic data releases dampen rate cut expectations
The US Department of Labor revealed that March sales beat estimates of 0.4% and increased 0.7% monthly. At the same time, retail sales of the control group – used to calculate the Gross Domestic Product (GDP) – went from 0.3% in February to 1.1% monthly in March, shattering forecasts of a 0.4% expansion.
Following the data, US Treasury yields soared, reflecting investors expecting fewer interest rate cuts from the Federal Reserve. Data from the Chicago Board of Trade (CBOT) shows that traders expect two rate cuts instead of three by the end of the year, indicating that rates would end up in the 4.75%-5.00% range. .
Other data showed the National Association of Home Builders (NAHB) housing market index was unchanged at 51 in April, as mortgage rates remain at 7%. NAHB Chairman Carl Harris stated: “April's flat reading suggests the potential for demand growth is there, but buyers are hesitating until they can better gauge where interest rates are headed.”
Risk appetite is significantly weighing on AUD/USD, courtesy of emerging tensions in the Middle East. Iran's recent offensive against Israel, which ended without casualties, has highlighted the possible volatility in the region and its possible impact on the AUD/USD.
Previously, New York Fed President John Williams commented that he expects the US central bank to begin easing its policy in 2024, while stressing that current policy is restrictive. Turning to strong retail sales data, he added that strong fundamentals are driving consumer spending.
The lack of economic data from Australia would keep investors focused on the upcoming Chinese data. In China, industrial production, GDP and retail sales will be published. If the data turns out weak, it could undermine the prospects for AUD/USD and open the door to test 0.6400.
AUD/USD Price Analysis: Technical Outlook
The daily chart confirms the bearish bias for AUD/USD, with traders eyeing a clear break of the February 13 low at 0.6442, once broken, it would refresh the yearly lows and open the door to challenging 0.6400. Below that level, new setbacks are observed, such as the November 10, 2023 low at 0.6336. On the other hand, if buyers lift AUD/USD above 0.6450, a push towards 0.6500 should be expected.
Source: Fx Street
I am Joshua Winder, a senior-level journalist and editor at World Stock Market. I specialize in covering news related to the stock market and economic trends. With more than 8 years of experience in this field, I have become an expert in financial reporting.
