The Australian Dollar (AUD) staged an impressive recovery on Monday, reversing intraday losses to enter positive territory, largely influenced by gains in the domestic equity market. The ASX 200 Index witnessed upward movement during the week’s opening session, primarily driven by a surge in tech stocks. However, the AUD’s ascent may face resistance from the stable US Dollar (USD).
The AUD encountered challenges following the release of unchanged Final Retail Sales and downbeat Trade Balance data from Australia in the previous week. Notably, Australia reported its smallest Trade Surplus in five months for February, partially attributed to a decline in iron ore exports.
Meanwhile, the US Dollar Index (DXY) gained ground on higher US Treasury yields following robust Nonfarm Payrolls data from the United States (US) on Friday. The improved labor market performance reduced the likelihood of a rate cut by the Federal Reserve (Fed) in June, as reflected in the decreased probability of such a move according to the CME FedWatch Tool. Traders eagerly await US Consumer Price Index data for March scheduled on Wednesday.
Market Digest Highlights:
Australia’s Trade Surplus (MoM) for March narrowed to 7,280 million, falling short of expectations and February’s reading, with exports decreasing by 2.2% and imports growing by 4.8%.
US Treasury Secretary Janet Yellen’s meeting with China’s Finance Minister Lan Foan focused on macroeconomic outlook and financial developments in both countries, emphasizing the role of maintaining communication channels.
Federal Reserve Bank of Dallas President Lorie K. Logan stressed it premature to consider cutting interest rates amidst inflationary risks, highlighting the need for resolving economic uncertainty.
US Nonfarm Payrolls (NFP) reported a significant increase of 303,000 jobs in March, surpassing expectations, with Average Hourly Earnings rising by 0.3% month-over-month.
Technical Analysis Outlook:
The Australian Dollar, trading around 0.6580 on Monday, faces immediate resistance near the 61.8% Fibonacci retracement level of 0.6596 and the psychological barrier of 0.6600. A breakthrough above this level could propel the AUD/USD pair towards 0.6650 and March’s high of 0.6667. Key support levels lie around the nine-day Exponential Moving Average (EMA) of 0.6557 and the major support level of 0.6550. A breach below the latter could exert downward pressure, potentially targeting the psychological level of 0.6500.
