- Improved market sentiment benefits the Australian dollar.
- Despite better than expected US economic data, the USD continues to trade lower.
- Fed’s Bullard: The US central bank’s base case is a 50 basis point hike at upcoming meetings.
- AUD/USD Price Preview: Still bearish bias, despite 200 point rally from year lows around 0.6820.
AUD advances but faces solid resistance around 0.7040-50 area and pulls back towards 0.7015 amid a session of positive market sentiment weighing on USD which remains weak on Tuesday despite of the rise in US Treasury yields. At the time of writing, the AUD/USD is trading at 0.7022.
Sentiment improves as China begins to get a grip on Shanghai Covid-19 crisis
Global equities continue to rise c, while in the forex space, risk-sensitive currencies rise, with their safe-haven peers crushed by improving market sentiment courtesy of developments in the Covid-19 crisis. 19 in China. This benefits the Australian dollar, which remains higher in the session, as the Minutes of the last meeting of the Reserve Bank of Australia (RBA) showed that the board discussed a 40 basis point increase in its meeting, and at At the same time, members agreed that more increases will likely be needed to ensure that inflation returns to its target.
After the minutes, the AUD/USD jumped close to 0.7000, between the daily pivots R1 and R2, located at 0.7010 and 0.7050, respectively.
US Retail Sales and Industrial Production Positive as Fed Spokespersons Make Statements
As for the data, the US docket included retail sales for April, which came in at 0.9% m/m, in line with estimates. However, the annual base reading rose 8.2%, beating expectations of 4.2%, illustrating the resilience of US consumers. On the other hand, industrial production was also positive, beating monthly and annual forecasts, further reinforcing the idea that the Federal Reserve is tightening its monetary policy at the rate it started a couple of weeks ago.
On the other hand, speakers from the Federal Reserve would dominate the headlines throughout the day. The president of the Federal Reserve of San Luis, James Bullard, affirmed that the trend of strong and continued growth of the US economy is the base perspective for the next 18 months and added that household consumption is expected to remain well during this year. He underscored that the Fed’s base case scenario is a 50 basis point rate hike at upcoming Fed meetings.
Later, Minnesota Fed President Neik Kashkari said the Fed has indicated it will bring rates to at least neutral by the end of 2022. He added that the Fed needs to bring inflation down to its 2% target sooner. wage price spiral and said he doesn’t know if the Fed’s actions will trigger a recession.
During the week, Australia will release the wage price index in its quarterly and annual readings, expected at 0.8% and 2.5%, respectively. For its part, in the US, the construction permits and other statements of the Fed will be published, led by the president of the Philadelphia Fed, Patrick Harker.
AUD/USD Price Forecast: Technical Outlook
AUD/USD remains under pressure despite rising from 0.6828 to 0.7040. At the time of writing, the Relative Strength Index (RSI) is at 42.50, pointing higher, but remains in negative territory. Based on Tuesday’s price action, unless AUD/USD bulls push prices above 0.7051, the pair would be vulnerable to additional selling pressure.
If the AUD/USD bulls pull off the above, the pair’s first resistance would be 0.71000, followed by the daily low of Mar 15, which has turned into resistance, at 0.7165, and then 0.7200. However, should this scenario not play out, the currency’s first support would be 0.7000, followed by Jan 28 daily low at 0.6967 and yearly low at 0.6828.
Additional technical levels
|Last Price Today||0.7004|
|Today’s Daily Change||0.0033|
|Today’s Daily Change %||0.47|
|Today’s Daily Opening||0.6971|
|20 Daily SMA||0.7112|
|50 Daily SMA||0.7298|
|100 Daily SMA||0.7245|
|200 Daily SMA||0.7269|
|Previous Daily High||0.6983|
|Previous Daily Minimum||0.6872|
|Previous Maximum Weekly||0.7074|
|Previous Weekly Minimum||0.6828|
|Monthly Prior Maximum||0.7662|
|Previous Monthly Minimum||0.7054|
|Daily Fibonacci 38.2%||0.6941|
|Daily Fibonacci 61.8%||0.6915|
|Daily Pivot Point S1||0.6901|
|Daily Pivot Point S2||0.6832|
|Daily Pivot Point S3||0.6791|
|Daily Pivot Point R1||0.7012|
|Daily Pivot Point R2||0.7053|
|Daily Pivot Point R3||0.7122|
Source: Fx Street