The AUD/USD pair dropped to approximately 0.7220 on Thursday as the US dollar gained strength after robust retail sales data for April was released.
Support for the dollar emerged as U.S. retail sales saw a 0.5% increase in April, aligning with market predictions and demonstrating that consumer spending remains strong, even with rising borrowing costs. Although the retail figure was down from 1.6% in March, it bolstered confidence in the U.S. economy’s resilience and fueled expectations that the Federal Reserve might keep its cautious policy in play for a longer stretch.
Producer inflation climbed by 1.4% month-over-month in April, bringing the annual Producer Price Index (PPI) growth to 6.0%, marking the highest surge in over three years, as per the latest report. On Wednesday, U.S. Treasury yields rose due to inflation data, but saw a slight decline on Thursday. This fluctuation provided a boost to the dollar across the board, as traders lessened their anticipations for Fed rate cuts and began to factor in the chance of further tightening later in the year.
A White House representative mentioned that the discussion between U.S. President Donald Trump and Chinese President Xi Jinping went “well.” They evaluated measures to enhance economic collaboration between the two largest economies in the world. Reports indicated that expanding market access for U.S. firms to China, increasing Chinese investments, and prompting China to purchase U.S. agricultural products were topics of consideration.
Short-term technical analysis:
Examining the 4-hour chart, AUD/USD is currently at 0.7223, trading below the 20-period simple moving average (SMA) of 0.7241 but above the 100-period SMA of 0.7197, indicating a slightly bearish short-term outlook. The pair seems to pivot around the horizontal line at 0.7223, and with the Relative Strength Index (RSI) sitting near 44, it indicates a dip in momentum, suggesting that sellers have the upper hand while there’s some buying interest at lower levels.
In terms of resistance, the near-term levels are around 0.7239, with the 20-period SMA also at 0.7241. The upper limit is situated at the horizontal barrier around 0.7243. For support, the first point to watch is the pivot at 0.7223, followed closely by a horizontal bottom at 0.7220. If downward pressure intensifies, the 100-period SMA around 0.7197 offers a deeper support layer.
