AUD/USD hits 5-day low of 0.7430 on the broad based USD rally

Asian desks are buying US dollars in response to rising June Fed rate hike odds, courtesy of which the AUD/USD hit a 5-day low of 0.7423.

The CME FedWatch puts the probability of a 25 basis point rate hike in June at 87.7%.

Eyes US data

The second release of US GDP is expected to revise the growth rate higher to 0.9% y/y from 0.7%. A strong data might add to the bid tone around the US dollar. However, the main focus is on the US core PCE and durable goods orders data.

Fed minutes released earlier this week showed the policymakers need more evidence that the first quarter slowdown was transitory. Consequently, the USD could be sold aggressively heading into the weekend if the US data disappoint expectations.

China opts for scrap

The Aussie side of the story looks weak, given the potential for further losses in iron ore prices. A fresh headwind for iron ore is the increasing use of scrap in China.

Furthermore, gold prices (key Aussie export) could remain under pressure ahead of the June Fed.

AUD/USD Technical Levels

The trend line sloping downwards from the March high and April high is seen offering support at 0.7422, which, if breached, would open up downside towards 0.7389 (May 17 low) and 0.7368 (May 5 low). On the other hand, a break above 0.7448 (10-DMA) would expose 0.7467 (5-DMA) and 0.75 (zero levels).