- AUD/USD extends its sideways move and remains within the weekly range.
- The gloomy global economic outlook was seen as a key factor holding back the risk-sensitive AUD.
- Weak US GDP figures sparked some selling around the USD and help limit deeper losses in the pair.
The pair AUD/USD continues its struggle to gain any significant traction and remains stuck in a range since the start of the week. The pair remains defensive below the 0.7100 level during the North American session and has had a rather subdued reaction to the US macroeconomic releases.
The preliminary US GDP report showed that the world’s largest economy shrank at an annualized rate of 1.5% during the first quarter of 2022. The reading was weaker than the advance estimate of a 1.4% decline and the expected 1.3% drop, which in turn sparked fresh selling around the US dollar and gave the AUD/USD some support.
Apart from this, the speculation that the Federal Reserve could pause the cycle of rate hikes later this year, coupled with a generally positive tone around equity markets, weighed on the USD as a safe haven. However, concerns about a worsening global economic outlook dampened the bullish move and acted as a headwind for the risk-sensitive AUD.
From a technical point of view, the one-week trading range forms a rectangle formation on the short-term charts and points to indecision on the short-term path of the AUD/USD pair. This occurs despite the Reserve Bank of Australia signaling that further interest rate hikes are still possible in June.
The price action seems to suggest that the recent strong recovery move from the yearly low is over and the path of least resistance for the AUD/USD pair is to the downside. That said, sustained strength above the 0.7125 region will negate any short-term negative outlook and pave the way for a further move higher.
AUD/USD technical levels
Source: Fx Street
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