Aussie Clings to Support as US Dollar Retreats Despite Strong US Data

On Thursday, the Australian dollar found brief support around the $0.6500 level, despite continuing downward trends. The upwardly revised US economic growth data made little to change the downtrend, as the US Dollar declined from a six-week high.

The Reserve Bank of Australia’s (RBA) recent interest rate hikes have made Australia’s cost-of-living crisis worse. Due to this, consumer spending has decreased, as seen by the slower-than-expected growth in retail sales in February.

Traders might look to short the AUD on a pullback towards $0.6530, targeting profits near $0.6500 or even as low as $0.6440. Conversely, a surge above $0.6560 could push the AUD towards $0.6600 and even higher.
Overall, the AUD/USD is caught in a tug-of-war between a potentially dovish Fed and Australia’s domestic woes. The upcoming US inflation data will be a key factor to watch in the near term.

US Dollar Declines Despite Robust GDP

Following the Bureau of Economic Analysis’s (BEA) revision of the US Q4 2023 growth to 3.4%, the US Dollar was unable to maintain its gains. The momentum behind the greenback was not maintained by this encouraging data point.

Investor attention now shifts to the core Personal Consumption Expenditure Price Index (PCE) data for February, due Friday. This data will offer clues about the Federal Reserve’s (Fed) future interest rate decisions. A lower-than-expected inflation reading could signal a potential pause in rate hikes, potentially benefiting the AUD.

Technical Outlook for AUD/USD
The AUD/USD is expected to test support near $0.6520, potentially breaking a technical chart pattern. Short-term technical indicators suggest weak demand for the AUD, but the Relative Strength Index (RSI) remains neutral, indicating some market indecision.