Published on May 26, 2023

Daily Analysis For AUD/USD 26-05-2023

AUD/USD Analysis

Key Points for AUD/USD pair

• The AUD/USD pair has rebounded from the yearly low and reversed its three-day downtrend, reaching a new intraday high. The recovery comes despite Australia Retail Sales showing stagnant growth in April, unchanged from the previous month's 0.4% increase.

• US Dollar bulls have retreated from a significant resistance line, partly due to mixed concerns surrounding the debt ceiling and unimpressive talks from the Federal Reserve.

• Traders are closely watching the US Durable Goods Orders and the Fed's preferred inflation gauge, which are important indicators. Updates on the US default situation are also critical for market sentiment.

Today's Scenario: - The AUD/USD pair has rebounded from its yearly low and recorded its first daily gain in four sessions, rising to 0.6515 ahead of the European session on Friday. The Australian dollar seems unfazed by the disappointing Australian Retail Sales data, while benefiting from the pullback in the US Dollar.

Australia's Retail Sales growth for April came in at 0.0%, falling short of market expectations of 0.2% and the previous reading of 0.4%.

The US Dollar Index (DXY) has retreated from a 2.5-month high to 104.17 due to concerns over US policymakers' inability to reach a deal on extending the US debt ceiling. Reports suggest that there is a $70.0 billion gap that needs to be resolved by negotiators to reach an agreement. US House Speaker Kevin McCarthy acknowledged the lack of agreement and stated that talks would continue until a deal is reached.

Despite positive US economic data, the Federal Reserve (Fed) officials have adopted a cautious stance, which has supported the US Dollar bulls. Additionally, China's foreign exchange intervention and a slightly positive sentiment in the Asia-Pacific region, despite doubts about the Reserve Bank of Australia's hawkish moves, have provided support for the AUD/USD pair's corrective bounce.

In terms of US economic indicators, the second estimate of Q1 2023 Annualized Gross Domestic Product (GDP) was revised up to 1.3% compared to the initial forecast of 1.0%. The Chicago Fed National Activity Index for April improved to 0.07 from the previous reading of -0.37, and the Kansas City Fed Manufacturing Activity for May improved to -2 compared to the previous reading of -21. The US Pending Home Sales for April showed improvement on a yearly basis but eased on a monthly basis, while the Core Personal Consumption Expenditures rose to 5.0% in the preliminary readings compared to the previous reading of 4.9%.

Following the release of the data, Richmond Fed President Thomas Barkin commented on the Fed's efforts to determine how slowing demand affects inflation, while Boston Federal Reserve President Susan Collins suggested that the Fed may be nearing a pause in interest rate increases.

In the markets, US stock futures show mild losses, while equities in the Asia-Pacific region are edging higher. Meanwhile, US Treasury bond yields have retreated from their recent multi-day highs.

Looking ahead, traders are preparing for key data releases, including the US Durable Goods Orders for April and the Core Personal Consumption Expenditure (PCE) Price Index, which is the Fed's preferred inflation gauge for the same month. Market sentiment is expected to play a crucial role in the direction of the AUD/USD pair.

Diagram of AUD/USD

Economic Events: -

GMT	Event	Impact	Currency
00:30	(Japan) Tokyo Core CPI YoY	Low	JPY
00:30	(Japan) Tokyo CPI YoY	Low	JPY
00:30	(Japan) Tokyo CPI Ex Food and Energy YoY	Low	JPY
02:30	(Australia) Retail Sales MoM	High	AUD
04:35	(Japan) 3-Month Bill Auction	Low	JPY
06:00	(Japan) Leading Economic Index	Low	JPY
06:00	(Japan) Coincident Index	Low	JPY
07:00	(Lithuania) Retail Sales MoM	Low	EUR
07:00	(Lithuania) Retail Sales YoY	Low	EUR
07:00	(United Kingdom) Retail Sales ex Fuel MoM	High	GBP
07:00	(United Kingdom) Retail Sales ex Fuel YoY	High	GBP
07:00	(United Kingdom) Retail Sales YoY	High	GBP
07:00	(United Kingdom) Retail Sales MoM	High	GBP
07:30	(Switzerland) Non Farm Payrolls	Low	CHF
07:45	(France) Consumer Confidence	Medium	EUR
08:15	(Euro Area) ECB Enria Speech	Low	EUR
08:40	(Euro Area) ECB Lane Speech	Medium	EUR
09:00	(Italy) Consumer Confidence	Medium	EUR
09:00	(Italy) Business Confidence	Medium	EUR
09:00	(Austria) Bank Austria Manufacturing PMI	High	EUR
10:10	(Italy) 6-Month BOT Auction	Low	EUR
11:00	(France) Jobseekers Total	Low	EUR
11:00	(France) Unemployment Benefit Claims	Medium	EUR
11:00	(Luxembourg) Balance of Trade	Low	EUR
13:30	(Canada) Wholesale Sales MoM	Low	CAD
13:30	(United States) Goods Trade Balance	High	USD
13:30	(United States) Wholesale Inventories MoM	Medium	USD
13:30	(United States) Core PCE Price Index MoM	High	USD
13:30	(United States) Core PCE Price Index YoY	Low	USD
13:30	(United States) PCE Price Index MoM	Medium	USD
13:30	(United States) PCE Price Index YoY	Medium	USD
13:30	(United States) Personal Spending MoM	High	USD
13:30	(United States) Personal Income MoM	High	USD
13:30	(United States) Retail Inventories Ex Autos MoM	Medium	USD
13:30	(United States) Durable Goods Orders Ex Transp MoM	High	USD
13:30	(United States) Non Defense Goods Orders Ex Air	Low	USD
13:30	(United States) Durable Goods Orders MoM	High	USD
13:30	(United States) Durable Goods Orders ex Defense MoM	High	USD
15:00	(United States) Michigan Consumer Expectations	Low	USD
15:00	(United States) Michigan Current Conditions	Low	USD
15:00	(United States) Michigan 5 Year Inflation Expectations	Low	USD
15:00	(United States) Michigan Consumer Sentiment	High	USD
15:00	(United States) Michigan Inflation Expectations	Low	USD
16:00	(Canada) Budget Balance	Low	CAD
18:00	(United States) Baker Hughes Oil Rig Count	Low	USD
18:00	(United States) Baker Hughes Total Rig Count	Low	USD

Buy Scenario: - The AUD/USD pair has reached a six-month low, declining to 0.6500 in early Friday trading in Asia. The downward pressure on the Australian dollar stems from the overall strength of the US Dollar and the pessimistic outlook for Australian Retail Sales data in April, which is expected to decrease to 0.2% month-on-month compared to the previous reading of 0.4%.

From a technical standpoint, a daily close below the 0.6550 support level, which now acts as resistance, coupled with bearish signals from the Moving Average Convergence Divergence (MACD) indicator, keeps sellers of the AUD/USD pair optimistic. Furthermore, an inclined trend line since late November 2022 and the 61.8% Fibonacci retracement level from the AUD/USD's upward movement between October 2022 and February 2023 represent a significant resistance zone at 0.6550.

Even if the AUD/USD manages to surpass the aforementioned resistance at 0.6550, a descending resistance line from two weeks ago, currently near 0.6615, may challenge buyers before relinquishing control.

Overall, the AUD/USD pair remains in the sights of bears until it achieves a daily close above the 100-day moving average (DMA) level of 0.6775. Till we do not advise to buy AUD/USD.

Sell Scenario: - On the downside, the key support level to watch for AUD/USD bears is the 78.6% Fibonacci retracement level around 0.6385, which is reinforced by the oversold reading on the 14-day Relative Strength Index (RSI). Additionally, the round figure of 0.6400 also acts as a potential downside barrier. Till we do not advise to sell AUD/USD.

Support and Resistance Level: -