- Following the bad US data, AUD/USD reversed course and sank below 0.7000.
- Federal Reserve officials objected to interest rates going below 5%.
- AUD/USD Price Analysis: FAilres at 0.7000, exacerbated the decline towards 0.6965.
The AUD/USD it erases its previous gains after hitting a multi-month high at 0.7063, plunges below 0.7000 and is back 0.27% on the day. Risk appetite deteriorated amid the lack of catalyst, although US data showed the economy slowing, which could have been the reason for the sour sentiment turn. The AUD/USD pair is trading at 0.6961.
US economic indicators were worse than expected, but supported the USD
Wall Street registers losses of between 0.77% and 1.21%. The Commerce Department reported December US Retail Sales contracting 1.1%m/m, above the estimated 0.8% contraction and worse than November’s downward revision to 1%. In annual terms, sales were flat at 6%.
At the same time, the Labor Department revealed that December’s Producer Price Index (PPI) plunged to -0.5%m/m, pulverizing estimates of 0.1%. YoY numbers rose 6.2%, below forecasts of 6.8%, while core PPI advanced 5.5%, versus estimates of 5.7%.
On the other hand, the Federal Reserve reported that the Industrial Production in the United States decreased by -0.7% in December and -1.7% in the fourth quarter. In addition, US manufacturing production fell -1.3% last month, although November data was revised down -1.3%.
On the other hand, several officials of the Federal Reserve, headed by the president of the Fed of San Luis, James Bullard, crossed cables. Bullard stated that policy makers should bring the rate above 5% “as soon as possible”. Echoing some of her comments, Cleveland Fed President Loretta Mester said rates need to rise “a little bit” above 5%, stressing that it would be necessary based on her projections.
Following these comments, the AUD/USD pair reversed course after trading above the 0.7000 level. No catalyst stimulated the market reaction, only the hawkish comments from Fed officials, which had been repeated since the beginning of the year.
AUD/USD Price Analysis: Technical Perspective
From a technical perspective, the AUD/USD daily chart is forming an inverted hammer which, if it closes below Tuesday’s open at 0.697, would compound a deeper pullback, with the 20 day EMA at 0.6863. as the first support. AUD/USD prices hit a successive series of highs, while the Relative Strength Index (RSI) failed to break above its previous high. Therefore, a negative divergence between the quotes and the RSI could pave the way down.
Key AUD/USD support levels would be the Jan 17 low at 0.6929, followed by the Jan 12 daily low at 0.6869, before the mentioned 20-day EMA at 0.6863.
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.
