AUD/USD Tumbles as US Dollar Gains Strength
EUR/USD experiences a sharp decline following the release of Q1 US Gross Domestic Product (GDP) data. While GDP growth fell short of expectations, the accompanying rise in inflation metrics has heightened Fed hawkishness expectations, boosting the US Dollar.
Factors Affecting the AUD/USD:
- Strong US Dollar: The US Dollar Index (DXY) advanced to 104.80, reflecting renewed expectations of a hawkish Fed stance due to high inflation. Release of the FOMC minutes later today is awaited for further clues.
- Disappointing Inflation Data Ignored: Despite a recent decline in US inflation data, the market anticipates the Fed to maintain its hawkish approach.
- China's Stimulus Fails to Boost AUD: Even though China's central bank's expansionary policy typically benefits the Australian Dollar (AUD) due to their trade ties, the AUD is unable to gain traction.
Technical Analysis (AUD/USD):
- Bearish Breakdown: The AUD/USD breached the Rising Channel support line on the four-hour chart, potentially signaling a bearish reversal.
- Uncertain Near-Term Outlook: The AUD currently trades below the 20-period EMA (0.6666), indicating potential weakness.
- RSI Indicator: The Relative Strength Index (RSI) slipping below 40 suggests a shift in momentum towards the downside.
Support and Resistance Levels:
- Support: A break below 0.6622 (May 15th low) could expose the AUD to 0.6580 (May 14th low) and 0.6540 (May 1st high).
- Resistance: A decisive move above 0.6714 (May's high) could lead to a climb towards 0.6771 (January 3rd high) and 0.6800.
The AUD/USD faces headwinds due to the resurgent US Dollar. The FOMC minutes and any further indications of a hawkish Fed could further weaken the AUD. A confirmed breakdown below key support levels would solidify the bearish trend. Conversely, a surge above resistance might signal a potential reversal.