Daily Price Outlook
As it bounces back from the yearly low of 0.6515 ahead of Friday’s European session, AUD/USD registers its first daily gain in four days. The Australian dollar supports the weakening US dollar while largely disregarding the unfavorable Australian economic data.
In April, retail sales growth in Australia remained at 0.0%, falling short of market expectations of 0.2% and the previous month’s 0.4% growth.
After releasing these statistics, Richmond Fed President Thomas Barkin remarked, “The Fed is in a test-and-learn situation to decide how slowing demand lowers inflation.” Meanwhile, Boston Federal Reserve President Susan Collins suggested that the Federal Reserve might be approaching where it should halt its interest rate hikes.
Asia-Pacific stocks exhibit slight gains in the current market environment, while US stock futures indicate minor losses. Additionally, US Treasury bond yields are retracing from their multi-day highs.
Despite Australia’s sluggish retail sales figures, AUD/USD remains relatively stable around the 0.6500 level. The Australian Bureau of Statistics released April’s monthly retail sales data, which showed no change.
While there was a previous increase of 0.4%, market expectations were for a 0.2% growth. The lackluster consumer demand will likely steer the Reserve Bank of Australia (RBA) towards adopting a neutral stance on interest rates at its upcoming monetary policy meeting in June.
In a surprising move, RBA Governor Philip Lowe raised interest rates by 25 basis points (bps) to 3.85% during the May monetary policy meeting. The RBA believed the existing monetary policy measures were not sufficiently restrictive to control inflation.
According to Reuters, Boston Fed Bank President Susan Collins suggested on Thursday that the Federal Reserve “may be at or near” where it should halt its interest rate increases. She noted that while inflation levels remained elevated, there were encouraging signs of restraint.
AUD/USD – Technical Outlook
During the Asian trading session, the AUD/USD pair received support near the 0.6490 level and is currently trading around 0.6520. On the four-hour timeframe, a bullish pattern known as an inside bar has formed, characterized by a hammer candle followed by a strong bullish candle. This suggests a potential reversal from the previous bearish trend and the emergence of bullish momentum.
The pair may experience a moderate upward movement, targeting the 23.6% Fibonacci retracement level at 0.6530. If the pair manages to break above the resistance level at 0.6555, which aligns with the 38.2% Fibonacci retracement level, further upside potential could be expected. A breakthrough of the 0.6550 level could lead to the next target at the 61.8% Fibonacci retracement level around 0.6599.
However, if the pair violates the support level at 0.6490, it could decline towards the next support level at 0.6453. In summary, the 0.6490 level is likely to play a significant role as a pivot today, and traders should carefully monitor the price action for potential opportunities to capitalize on a bullish retracement.