Aussie Dollar Snubs Poor Retails Sales Data

AUD/USD ANALYSIS & TALKING POINTS

• Australian retail sales figures show high interest rate environment may be weighing negatively on consumers.
• US economic data and Fed speakers under the spotlight later today.
• AUD/USD 200-day MA break could expose long-term trendline resistance once more.

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AUSTRALIAN DOLLAR FUNDAMENTAL BACKDROP

The Australian dollar reaction to this mornings retail sales report was interesting as the move back into negative territory (see economic calendar below) may suggest the Australian economy (households) are feeling the impact of the current restrictive monetary policy. Although one data point does not make a trend, if these spending habits continue to decline, the Reserve Bank of Australia (RBA) fight against lower inflation may follow. The RBA’s Governor Bullock portrayed or more uncertain and cautious message in her statements shown below:

“We’re in a period where we have to be a bit careful.”

“I want to avoid imposing too much and pushing up the jobless.”

“We need to ensure that inflation expectations stay anchored.”

“Monetary policy is restrictive and is dampening demand.”

The PBoC’s Governor Pan on the other may have aided the pro-growth AUD by stating that monetary policy will remain accommodative.

AUD/USD ECONOMIC CALENDAR (GMT +02:00)

Source: DailyFX economic calendar

That being said, RBA money market pricing (see table below) shows an additional interest rate hike is still on the cards thus highlighting data dependency to come.

RBA INTEREST RATE PROBABILITIES

Source: Refinitiv

From a US perspective, yesterday’s bond auctions saw the 2, 5 and 10-year yields fall thus making the sale less desirable for investors. The 2-year Treasury yield stays depressed this morning and has supported the AUD against the muted greenback. Fed rate cut expectations are rising and the bearish 2024 outlook for the USD is gaining traction. Traders should not buy into this too soon and looking at the AUD/USD pair in particular, there may well be another dollar pullback this year. The trading day ahead will be US focused with CB consumer confidence set to decline while Fed officials will shed more light on the broader Fed picture.

TECHNICAL ANALYSIS

AUD/USD DAILY CHART

Chart prepared by Warren Venketas, TradingView

AUD/USD daily price action illustrates the recent key break above the 200-day moving average (blue) resistance region, now pushing up against the 0.6596 swing high. With the Relative Strength Index (RSI). nearing overbought territory, there is still room for more upside that may coincide with the long-term trendline resistance zone (black) before a pullback. However the current daily candle is forming a long upper wick and should the daily close remain so, there could be AUD downside sooner.

• 0.6700
• Trendline resistance
• 0.6596

Key support levels:

• 200-day MA
• 0.6500
• 0.6459
• 50-day MA
• 0.6358

IG CLIENT SENTIMENT DATA: BULLISH (AUD/USD)

IGCS shows retail traders are currently net LONG on AUD/USD, with 55% of traders currently holding long positions.

Download the latest sentiment guide (below) to see how daily and weekly positional changes affect AUD/USD sentiment and outlook.

Contact and followWarrenon Twitter:@WVenketas