The AUD/USD currency pair experienced a notable decline towards the 0.7220 area on Thursday, driven by a strengthening US Dollar (USD) following the release of April’s Retail Sales data. The US retail figures, which rose by 0.5% in April, aligned with market expectations and underscored the ongoing resilience of consumer spending, even in the face of higher borrowing costs.
While the retail sales increase marked a decrease from March’s robust 1.6%, the data has contributed to the growing confidence in the strength of the US economy. This bolstered the outlook for the Federal Reserve’s monetary policy, suggesting that it may maintain its restrictive stance for an extended period.
In a related economic update, the US Producer Price Index (PPI) report indicated a significant surge in producer inflation, with a month-over-month increase of 1.4% in April and an annual PPI escalation of 6.0%. This represented the steepest rise in over three years, prompting a rise in US Treasury yields on Wednesday. Although yields showed some decline on Thursday, the inflation data has had immediate effects on the USD, leading traders to revise their expectations regarding potential Fed rate cuts and to increasingly factor in the likelihood of further tightening measures later in the year.
On the geopolitical front, a White House official characterized the recent meeting between US President Donald Trump and Chinese President Xi Jinping as “good.” The discussions encompassed strategies to bolster economic cooperation between the world’s two largest economies. Key areas of focus included expanding market access for American companies in China, promoting Chinese investments in the US, and enhancing purchases of US agricultural products by China.
In terms of technical analysis, the AUD/USD pair, currently trading around 0.7223, indicates a marginally bearish near-term outlook. It has dipped below the 20-period Simple Moving Average (SMA) of 0.7241 while remaining above the 100-period SMA positioned at 0.7197. The trading activity suggests that the pair is pivoting around the horizontal level of 0.7223, with the Relative Strength Index (RSI) hovering near 44, signaling diminishing momentum and suggesting that sellers may dominate the market, although buying interest is expected on pullbacks.
Immediate resistance for the AUD/USD is set around 0.7239 and the 20-period SMA at 0.7241, with a significant barrier at approximately 0.7243. Conversely, initial support is identified at the pivot of 0.7223, with further support at the horizontal level of 0.7220, while the 100-period SMA at 0.7197 provides a deeper layer of demand should the selling pressure continue.
