The Australian Dollar (AUD) continued its decline for the third consecutive session on Tuesday, reflecting market caution amidst geopolitical tensions stemming from Israel’s anticipated response to Iran’s recent air assault. However, a partial recovery ensued for the AUD/USD pair following mixed data releases from China.
Concerns loom over the Australian Dollar amid speculation that the Reserve Bank of Australia (RBA) may consider preemptive interest rate cuts ahead of the United States (US). The Financial Review reports that persistent inflationary pressures in the US have raised doubts about the Federal Reserve’s ability to enact policy adjustments this year. Traditionally, as the preeminent central bank overseeing global financial markets, the Federal Reserve often leads international rate-cutting cycles.
Meanwhile, the US Dollar Index (DXY) maintains its upward trajectory, buoyed by rising US Treasury yields. The robust US Retail Sales data further diminished expectations of imminent monetary easing by the Federal Reserve, strengthening the US Dollar (USD). Market focus now shifts to the upcoming US housing data release and Federal Reserve Chair Jerome Powell’s address at the Washington Forum.
In other market news:
Australian labor market data, including seasonally adjusted Employment Change and Unemployment Rate for March, is scheduled for release on Thursday.
China’s first-quarter Gross Domestic Product (GDP) expanded by 1.6% quarter-on-quarter and 5.3% year-on-year, surpassing expectations.
China’s Industrial Production (YoY) in March fell short of market forecasts, while Retail Sales growth also moderated.
Federal Reserve Bank of San Francisco President Mary Daly emphasized the need for continued vigilance on inflation despite significant progress.
According to the CME FedWatch Tool, the probability of unchanged interest rates in the June meeting has risen to 77.5%.
US Treasury bond yields stand at 4.92% for the 2-year and 4.61% for the 10-year bonds at the time of reporting.
Technical analysis suggests that the Australian Dollar may face further downward pressure, with key support at the psychological level of 0.6400. A breach below this level could drive the AUD/USD pair towards major support levels at 0.6350 and 0.6318. Conversely, resistance lies at 0.6450 and 0.6464, with potential upside momentum towards the nine-day Exponential Moving Average (EMA) at 0.6499 and the psychological level of 0.6500 contingent on a breakout above the latter Fibonacci retracement level.
