– AUD/USD catches some bids on Monday and stalls Friday’s rejection slide from the 100-day SMA.
– Expectations for an imminent Fed rate-hike pause act as a headwind for the USD and lend support.
– Investors also seem reluctant ahead of the RBA minutes and Chinese data dump due on Tuesday.
The AUD/USD pair attracts some buying on the first day of a new week and stalls Friday’s rejection slide from the 0.6800 mark, or the 100-day Simple Moving Average (SMA). Expectations that the Federal Reserve (Fed) will pause its rate-hiking cycle, sooner rather than later, fail to assist the US Dollar (USD) to capitalize on its recovery move from a one-year low, which, in turn, acts as a tailwind for the major. The bets were lifted by data released last week, indicating that disinflation is progressing smoothly. That said, a greater chance of another 25 bps lift-off at the next FOMC policy meeting in May lends some support to the Greenback and caps the upside for the pair, at least for the time being.
Investors started speculating that the US central bank might continue raising interest rates in the wake of a rise in short-term inflation expectations. In fact, the University of Michigan’s preliminary report showed that one-year inflation expectations rose to 4.6% from 3.6% in March and Consumer Sentiment Index inched up from 62.0 to 63.5 in April. Adding to this, impressive bank earnings eased concerns about a banking crisis that unfolded in March. Apart from this, resilience in US core retail sales suggested that the US economy is not so bad. This remains supportive of elevated US Treasury bond yields and continues to underpin the Greenback, which, in turn, might keep a lid on the AUD/USD pair.
Traders might also refrain from placing aggressive bets and prefer to wait on the sidelines ahead of the release of the minutes of the latest Reserve Bank of Australia (RBA) policy meeting on Tuesday. Investors will further take cues from the Chinese data dump amid signs that the recent recovery in the world’s second-largest economy is losing steam. Ahead of the key releases, Monday’s US economic docket, featuring the Empire State Manufacturing Index, might influence the USD price dynamics and provide some impetus to the AUD/USD pair. Apart from this, the broader risk sentiment might produce short-term trading opportunities around the pair later during the early North American session.
AUD/USD Technical Outlook
From a technical perspective, Friday’s failure near the 100-day SMA warrants some caution for bullish traders. The AUD/USD pair, however, shows some resilience below the 0.6700 mark on Monday, making it prudent to wait for some follow-through selling before positioning for any further depreciating move. In the meantime, the 0.6630 horizontal zone could act as immediate support ahead of the 0.6600 round figure. A convincing break below the latter will expose the YTD low, around the 0.6565 region touched in March, below which the AUD/USD pair could accelerate the fall toward the 0.6500 psychological mark.
On the flip side, the 0.6740-0.6745 confluence, comprising the 50-day SMA and the very important 200-day SMA, now seems to act as an immediate hurdle ahead of the 0.6800 mark (100-day SMA). A sustained strength beyond will negate any near-term negative bias and set the stage for additional gains. The AUD/USD pair might then climb to the next relevant hurdle near the 0.6870-0.6875 horizontal zone before aiming to reclaim the 0.6900 round-figure mark.