AUD/USD drops to new session lows near 0.7170 after US data

  • Retail sales rise less than expected in the U.S. in August.
  • Industrial production expands at a robust pace.
  • US Dollar Index continues to retrace its losses toward 95.

The AUD/USD pair took advantage of the broad-based USD weakness on Thursday and rose to its best level above the 0.72 but failed to build on its bullish momentum on Friday. With the greenback retracing yesterday's losses, the pair turned negative and touched a session low of 0.7170. As of writing, the pair was trading at 0.7176, losing 0.25% on the day.

Today's data from the United States showed that the retail sales increased 0.1% on a monthly basis in August to fall short of the market expectation of 0.4%. On a positive note, however, July's reading was revised up to 0.7% from 0.5%. Assessing today's report, "the underlying situation is very positive. Consumer confidence is at an 18-year high (Conference Board measure) thanks to big tax cuts, a strong jobs market and buoyant asset prices. If we see more upward momentum in wage rates then the story can only get better. As such, we still look for Federal Reserve interest rate hikes in both September and December," ING analysts wrote.

Other data in the day revealed that industrial production expanded by 0.4% from July to August and came in slightly above the analysts' estimate of 0.3%. The US Dollar Index, which closed the previous day at its lowest level in two weeks below the 95 mark, was last seen up 0.2% on the day at 94.72.

Later in the session, the University of Michigan will be releasing its consumer sentiment report. The headline confidence index is expected to improve to 96.6 (preliminary) from 96.2.

Technical levels to consider

The initial resistance for the pair aligns at 0.7215 (daily high/20-DMA) ahead of 0.7300 (50-DMA) and 0.7380 (Aug. 21 high). On the downside, supports are located at 0.7140 ((sep. 5 low), 0.7090 (Sep. 12 low) and 0.7000 (psychological level).

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