- US Dollar mixed on a relatively quiet Monday.
- Key events ahead: Australia CPI on Wednesday and US Q1 GDP on Thursday.
- AUD/USD weakens, but losses are limited on low volume.
The AUD/USD is falling on Monday for the second day in a row, consolidating below 0.6700. In a quiet session, the US Dollar is mixed and equity prices in Wall Street are falling modestly.
Sideways, looking south
Data released on Monday showed the important Chicago Fed National Activity Index remained unchanged in March at -0.19, and the Dallas Fed Manufacturing Index came in at -23.4 well below the -15.7 of market consensus. The numbers had no significant impact on subdued markets. US yields are falling modestly weighing on the Greenback.
The key event in the US will be on Thursday with growth numbers from the first quarter. No Federal Reserve officials will speak this week ahead of the FOMC May 2-3 meeting.
In Australia, the critical report will be on Wednesday, with Q1 and March Consumer Price Index, the last crucial report ahead of next week’s Reserve Bank of Australia (RBA) meeting. At the moment, the odds favor a new pause from the RBA.
Short-term outlook
Technically the outlook for the Aussie has worsened after the AUD/USD dropped below the 20-day Simple Moving Average (SMA). The pair bottomed on Monday at 0.6665 and then rebounded modestly. The key support is the 0.6630 area, ahead of the March low at 0.6618. A recovery above 0.6700 should strengthen the Aussie, with the next resistance at 0.6740.
Technical levels
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The AUD/USD pair is currently holding below the 0.6700 level, after breaking below it yesterday. This is its lowest level in more than a week and suggests that the pair is struggling to establish any meaningful direction.
The AUD/USD pair has seen significant weakness over the past few weeks as it has been weighed down by a mix of negative sentiment and risk aversion. This has caused investors to flock towards the US dollar, pushing the AUD/USD lower.
The US dollar has been the main driver of the pair’s weakness lately as the greenback’s renewed demand has pushed the AUD/USD lower. The recent rise in US Treasury yields has also been a key factor in the pair’s weakness as traders have shifted towards the greenback.
The recent surge in coronavirus cases across the globe has also been weighing on investors’ sentiment and keeping the pair around weekly lows. The lack of progress in US-China trade talks has further weakened the Australian dollar.
Looking ahead, investors will be keeping a close eye on economic data from both the US and Australia. If the US economic data surprises to the upside, then it could help to push the AUD/USD higher. At the same time, if Australia’s data surprises to the downside, then it could put further pressure on the AUD/USD.
Overall, the AUD/USD pair is likely to remain vulnerable to further losses if risk appetite remains sour. The pair is likely to remain range-bound for now and could only make a meaningful move if there are big positive developments in both US-China trade talks and other economic releases.
