- AUD/USD remains positive for the week, up 0.70%.
- Chinese Prime Minister Li Keqiang warned that the economy might not meet its targets, weighing on AUD/USD.
- AUD/USD Price Forecast: Sloping to the downside and could have peaked around 0.7100.
The AUD/USD remains almost lateralized during the American session, after operating in a range of 0.7057 from the minimum to 0.7109 from the maximum, in the midst of an environment of risk appetite in the market that keeps the US equities on the rise, while the assets of shelter they recede. At 0.7090, the AUD/USD is poised to end the day with minimal gains.
Sentiment remains positive after Wednesday’s release of the Fed’s May meeting minutes. The US central bank declared that all participants agreed to raise interest rates by 50 basis points at upcoming meetings and said they needed to move “quickly” to a neutral stance. Additionally, officials said they would remain focused on inflationary pressures, very much in line with the Fed’s rhetoric, from May 5.
Meanwhile, the dollar index fell 0.20% during the American session, reaching 101.877, which opens the door for a drop towards the daily low of April 21 at 99.818. US Treasury yields recovered some ground, led by 10-year Treasury yields, which appear to have bottomed just below the 50-day moving average (DMA), and are gaining two basis points, standing at 2,768%.
During the Asian session, Chinese Premier Li Keqiang sounded the alarm about the slowdown in the economy. He made comments to local officials at an emergency meeting. He said growth risks were falling below a “reasonable” range and warned that China faced a much longer road to recovery if the economy did not continue to expand at a certain pace.
These comments put AUD/USD in check, which was headed to post a new weekly high above the current one at 0.7127, with the aim of testing the March 15 low at 0.7165.
As for the US macroeconomic data, the agenda included the preliminary figures of the Gross Domestic Product (GDP) for the first quarter, which showed a contraction of 1.5% year-on-year, much higher than the -1.3% expected. Trade dynamics weighed on the readings, as exports fell at a 5.4% pace in the first quarter, while imports soared 18.3%. Nonetheless, consumer spending rose 3.1% versus estimates of 2.7% year-on-year. Additionally, the Labor Department reported initial jobless claims for the week ending May 20, which increased by 210,000, below the forecast 215,000.
The Australian economic docket will include retail sales in its preliminary reading, expected to be 0.9%m/m on Friday. In the United States, the economic docket will reveal the Fed’s favorite measure for inflation, Personal Consumption Expenditure (PCE), forecast at 6.4%, three times the US central bank’s target.
AUD/USD Price Forecast: Technical Outlook
AUD/USD continues to have a medium to long-term bearish bias. In the short term, the 20-day moving average (DMA) at 0.7034 suggests that the main trend is up, but it should be noted that the four-day rally has been limited to the 0.7100 figure, which means that it could be ending. The oscillators, which are trending lower within bearish territory, also confirm this.
That said, the first support for the AUD/USD would be the 20 DMA at 0.7034. A break below would expose the May 18 cycle low at 0.69490, followed by the year’s low at 0.6828.
Technical levels
Source: Fx Street
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