The AUDUSD currency pair has reached the targets of the last forecast. Currently, there is an attempt to bounce up, but it may be short-lived. There will be a shortage of dollar liquidity in the markets soon due to the need of the U.S. Treasury to borrow in the debt market. In this case, the dollar index will rise.
Last week retail sales data in Australia were released. Retail sales represent the volume of goods and services sold to final consumers over a certain period of time. In addition to GDP, inflation and unemployment rates, retail sales are on the list of the most important macroeconomic indicators. The particular importance of retail sales lies in their role as a leading indicator, i.e. on the basis of their dynamics the changes that have not yet occurred in the state of the entire economy are forecasted.
Retail sales are worse than expected, showing 0% dynamics. Analysts had forecast sales growth by 0.3%. This data points to the weakness of the economy and the need for future monetary policy easing in Australia. In the case of a rate cut, the pressure on the Australian dollar will strengthen.
On the contrary, there is a tightening of rate forecasts in the U.S. Data on the U.S. economy are showing strength, and inflation is staying at a high level. All of this supports the dollar.
Meanwhile, high levels of inflation continue to concern U.S. Federal Reserve System (Fed) officials, including the President of the Federal Reserve Bank in Minneapolis, Neel Kashkari.
In recent days, they intensified the pressure with a hawkish forecast for interest rates. This has dampened inflows into low risk assets, as rising interest rates reduce the attractiveness of non-yielding gold.
Market participants estimate the probability of remaining the Fed's interest rate at the same level in June at 42.7%.
According to the technical analysis, the AUDUSD currency pair makes an attempt to reverse. The resistance level, which previously was a support, is under testing. It is believed that the trend of the dollar strengthening is not over yet, and the Australian dollar will be at a local low again.
The level of 0.649 will be the downside target. Stop-loss can be set on the rise above the resistance line at 0.659.
The AUDUSD currency pair decline:
Take profit – 0.649
Stop-loss – 0.659