- AUD/USD trims gains but remains positive for the week, down 0.17%.
- Positive Q1 Australian GDP and China Purchasing Managers’ Index (Caixin PMI) data buoyed sentiment in the Asian session.
- The dollar rose as US ISM manufacturing surprised to the upside and job openings fell.
- AUD/USD Price Forecast: Failure to Recover from 100 DMA Opened the Door for Further Losses.
AUD pulls back from weekly highs around 0.7230 and falls 70 pips during the North American session on Wednesday towards daily lows near 0.7160. At 0.7170, the AUD/USD set to extend losses as sellers prepare to break below weekly high of 0.7149, aiming to drag the pair towards 0.7100.
Negative sentiment and US dollar strength weigh on AUD/USD
Negative market sentiment, reflected in global equities, has AUD/USD continuing to extend its losses. Despite positive data from Australia relative to Q1 GDP, which recovered 0.75% qoq (3.3% yoy), and China’s Caixin PMI for May coming in line with expectations, concern by the tightening of monetary conditions by the US Federal Reserve could lead the economy into recession.
Market reaction was subdued, although mid-European session AUD/USD jumped to weekly highs around 0.7230 and pulled back following the release of upbeat US economic data.
Turning to the US economic docket, the May ISM Manufacturing PMI advanced in May as new orders and output growth accelerated, suggesting that demand remains strong. The reading rose to 56.1 from 55.4 in April, while estimates hovered around 54.5. Meanwhile, the US JOLTs report showed April openings fell from 11.9 million in March to 11.4 million, offering some relief to employers struggling to hire or keep workers.
Meanwhile, the dollar index, which measures the value of the greenback against a basket of six pairs, rose 0.79% to 102,584, supported by higher US Treasury yields. The 10-year Treasury bond yield rises nearly 10 basis points to start June at around 2,944%.
Later in the day, San Francisco Fed President Mary Daly spoke and said she sees a couple of 50 basis point hikes and reinforced the need to get rates neutral expeditiously and would like to be in around 2.5% at the end of 2022.
AUD/USD Price Forecast: Technical Outlook
AUD/USD continues to have a bearish bias. Failure to recapture the 100 day moving average (DMA) at 0.7228 caused a drop below 0.7200. Furthermore, the Relative Strength Index (RSI) at 54.63 is in bullish territory but starting to head lower, indicating that some selling pressure could accelerate the decline towards 0.7100.
Therefore, the first support for the AUD/USD would be 0.7150. A break below would expose the May 27 low at 0.7089, followed by the 20 DMA at 0.7039. Once broken, the move towards the psychological level of 0.7000 is expected.
Technical levels
Source: Fx Street
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