Retail Sales Data Could Trigger RBA’s Pause
- Retail sales remained unchanged in April compared to a 0.4% increase in March.
- The slowdown in consumer spending indicates the RBA is effectively curbing demand.
- The dollar maintained its position close to a two-month high.
Today’s AUD/USD outlook is bearish. Consumers in Australia, facing high living costs and rising interest rates, reduced spending on food and dining out, resulting in flat retail sales in April. Consequently, this strengthens the argument for a pause in rate hikes next month.
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According to the data, retail sales remained unchanged in April compared to a 0.4% increase in March, falling short of analysts’ expectations of 0.2% growth.
Notably, the slowdown in consumer spending indicates that the Reserve Bank of Australia’s tightening measures, totaling 375 basis points since May, are effectively curbing demand. Retail sales volumes declined in the first quarter, contributing to consecutive quarterly contractions and posing a drag on economic growth.
Additionally, recent economic data, such as lower-than-expected quarterly wage gains, unexpected net employment decline in April, and a slight uptick in the jobless rate, support the argument for a pause in rates next month.
Elsewhere, despite a slight decline on Friday, the dollar remained close to a two-month high against major currencies. The anticipation of prolonged higher US interest rates supported it.
The ongoing debt ceiling negotiations between US President Joe Biden and top congressional Republican Kevin McCarthy impacted market sentiment. However, the news of progress toward a deal relieved investors and temporarily halted the recent greenback surge.
AUD/USD key events today
Investors will pay close attention to data from the US, including the core durable goods orders and the core PCE price index. The core PCE price index is important as the Fed uses it to gauge inflation.
AUD/USD technical outlook: 0.6500 support halts the downside
The bias for AUD/USD on the 4-hour chart is bearish. However, the price paused at the 0.6500 support level after a big bearish move. It is far below the 30-SMA, with the RSI pushing up slightly from the oversold region. All these support the bearish bias.
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Bulls have shown up at 0.6500 support, and the price might pull back to retest the 0.6576 resistance. However, the price will likely consolidate before it breaks below 0.6500 to continue the descent.
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