On Thursday, the Australian Dollar (AUD) struggled to recover from losses incurred since January 11, partly influenced by robust economic data from the United States (US). The AUD/USD pair weakened as heightened geopolitical tensions, stemming from US military strikes on Houthi targets in Yemen, increased risk aversion and boosted demand for the US Dollar (USD).
Despite Australia releasing moderate economic data on Thursday, it failed to lend support to the Australian Dollar. Consumer Inflation Expectations held steady at 4.5% in January, while the seasonally adjusted Unemployment Rate remained at 3.9% in line with expectations for December. However, Employment Change data indicated a decline, with the number of employed individuals decreasing by 65.1K, contrary to the anticipated increase of 17.6K.
The US Dollar Index (DXY) retreated from a five-week high at 103.69, driven by subdued US Treasury yields following Wednesday’s economic data. US Retail Sales (MoM) exceeded market consensus, rising by 0.6% in December. Retail Sales Control Group improved to 0.8%, and Retail Sales ex Autos (MoM) grew by 0.4%, surpassing market expectations.
Investor sentiment toward the US Dollar was bolstered as expectations for an early rate cut by the Federal Reserve diminished. The probability of a rate cut in March dropped to 57%, a notable decrease from over 70%.
Technical Analysis: Australian Dollar Faces Critical Levels at 0.6550
The Australian Dollar hovered around 0.6560 on Thursday, with immediate support at 0.6550. A breach below the latter may prompt the AUD/USD pair to navigate towards the psychological level at 0.6500, followed by the 61.8% Fibonacci retracement level at 0.6495. On the upside, the psychological resistance is anticipated at the 0.6600 level. Surpassing this barrier could propel the pair towards the major level at 0.6650, followed by the 14-day Exponential Moving Average (EMA) at 0.6659. Further upward momentum may lead to a test of the psychological level at 0.6700. Traders are closely monitoring these key levels for potential market movements.
