- The Australian dollar started the week on the wrong foot, falling 0.64%.
- Geopolitics, a firm US dollar and mixed economic data from China weighed on the AUD.
- AUD/USD Price Forecast: A failure to recover from 0.7500 could keep the pair pressured lower.
Australian dollar extends losses below 0.7400, hit by a depressed market mood courtesy of Russia’s escalating attacks on Ukraine, amid failed peace talks as Australia’s Foreign Minister Ukraine Kuleba said discussions at the Ministry level had not happened for weeks. AUD/USD is trading at 0.7346 at the time of writing.
Ukraine-Russia tensions, Chinese economic data and a firm US dollar keep AUD under pressure
Geopolitics continue to weigh on risk sensitive currencies such as the Australian dollar. In addition, mixed data from China, the world’s second largest economy and one of Australia’s largest trading partners, reported that its economy grew in the first quarter by 4.8% year-on-year, more than expected, but witnessed a contraction in consumption, as retail sales contracted 3.5% yoy, worse than the 1.6% decline, a headwind for the AUD.
Meanwhile, the US Dollar Index, a gauge of the dollar’s value against a basket of its rivals, rose 0.31% to 100.80, supported by expectations the Federal Reserve would hike 50bps at its May meeting.
Meanwhile, the Fed’s speech boosted the dollar’s outlook. Last week, New York Fed President John C. Williams (voter, neutral) said a 50bp rate hike is a reasonable option, but rate hikes will depend on the trajectory of the economy. Williams added that the Fed needs to move “quickly” to normal and more neutral policy levels.
Apart from this, the Australian economic docket would feature the release of the Reserve Bank of Australia (RBA) Meeting Minutes at 01:30 GMT, which would shed some light on rising interest rates. On the US front, the Fed speech led by St. Louis Fed President James Bullard will make remarks near the end of the American session, and Chicago Fed President Charles Evans , on Tuesday.
AUD/USD Price Forecast: Technical Outlook
AUD/USD broke below the Pitchfork center-parallel line around 0.7400, opening the door for further selling pressure as AUD/USD decline extended further into the middle of the 0.73-0.74 range. . At the same time, the Relative Strength Index (RSI) remains within bearish territory at 42.54, pointing lower and with enough room before reaching oversold conditions. However, an uptrend line converging with the 50 day moving average (DMA) is around the 0.7330-40 area and would be a tough support to break.
If that scenario plays out, the first support for the AUD/USD would be 0.7300. A branch of the latter would expose the 200-DMA at 0.7298 which intersects the midline between center and bottom. The parallel Pitchfork lines, once broken, would expose the 100 DMA at 0.7250.
Technical levels
Source: Fx Street
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