- Bad economic data from China paints a sour environment for Australia’s largest trading partner, a headwind for the AUD.
- A risk-off mood boosts the US dollar outlook.
- AUD/USD Price Forecast: The pair could be subject to a reversal move towards 0.7029 before resuming its downtrend.
AUD posts decent gains, despite weaker-than-expected Chinese economic data ahead of the release of the latest Reserve Bank of Australia (RBA) Meeting Minutes. In the American session, the AUD/USD it trades at 0.6945 at the time of writing this article.
Market sentiment continues to weigh on riskier assets, as evidenced by mixed trading in European and US equities. Also, a reflection of China’s zero tolerance policy against covid-19 is worse-than-expected economic data, with industrial production contracting 2.9% year-on-year and retail sales falling 11.1% year-on-year, which paints a cloudy economic outlook for America’s second-largest economy. the world. That’s a headwind for the Australian dollar as China is its biggest trading partner.
ING: RBA Minutes hint at size and timing of monetary policy
Regarding the RBA minutes, ING analysts wrote in a note that “Reserve Bank of Australia May meeting minutes will be closely scanned for clues as to the timing and size of further monetary tightening. . On Wednesday the expected salary data for the first quarter will be known. April employment figures will be released on Thursday, with the unemployment rate likely to drop below 4.0%.”
They added that “some recovery in global equities is surely needed at this point for AUD/USD to climb back above 0.7000, while another wave of risk aversion could send the pair to the 0.6600-0.6700 area in the near term.” “.
Before Wall Street opened, New York Federal Reserve President John Williams said the number one problem to solve is inflation, which is running too high and stubbornly persistent. He added that 50bp rate hikes make sense in upcoming meetings.
The US agenda would include the Fed speaking in the coming week, led by Chief Jerome Powell on Tuesday. As for the data, retail sales, industrial production, building permits and initial jobless claims for April would shed some light on the real economic state of the United States.
On the Aussie side, AUD/USD traders would look to the RBA minutes along with employment data and the Australian federal election.
AUD/USD Price Forecast: Technical Outlook
AUD/USD remains on the defensive, below the daily moving averages (DMA). A downtrend line drawn from the April 2022 highs could give AUD/USD bears a line in the sand to lean on, but the speed of the decline from 0.7600 to 0.6820 suggests a reversal move is ahead average, with the daily low of May 2 around 0.7029 as a target, before extending its losses.
If that scenario plays out, AUD/USD’s first resistance would be 0.7000, followed by the May 2 daily low at 0.7029. A break above would expose the downtrend line around the 0.7100 area.
Failure to do the above would put downward pressure on AUD/USD. The first support would be 0.6900. A break of the latter would expose the yearly low at 0.6828, followed by 0.6800.
Technical levels
Source: Fx Street
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