AUD/USD records a fresh two-month low but jumps towards 0.7100s post-US GDP as Australian PPI looms

AUD/USD is losing some ground after on Wednesday, AUD/USD bears took a breather before pushing the pair beyond the 0.7100 mark, reaching a fresh two-month low around 0.7055, though late as the Wall Street close looms, the Aussie is back above the 0.7100 mark. At the time of writing, the AUD/USD is trading at 0.7100.

Sentiment improves, US economy contracts, but the USD stays resilient and rose

Global equities rallied for a second straight trading session amidst a positive market sentiment. China’s coronavirus outbreak seems to give a respite to investors, while the Ukraine-Russia conflict continues to escalate on Russia’s desire for victory. Aside from the macro environment, the US Gross Domestic Product for the first quarter showed that the US economy shrank 1.4% on an annualized pace, the first in nearly two years, though it’s unlikely to stop the Federal Reserve from hiking interest rates of 0.50 bps, as it attempts to tame inflation.

Stagflation talks began once the report hit the wires. Analysts of ING wrote in a note that domestic demand held up firmly when considering the hit to the economy momentum caused by the Omicron variant last year. Furthermore, they added that “consumer spending grew 2.7%, while non-residential investment expanded 9.2% and residential investment posted a 2.1% gain.” They attributed the negative figure to the drop in exports and imports surplus.

At the same time, the US Department of Labour released the Initial Jobless Claims for the week ending on April 22, which rose by 180K, lower than the 182K estimated.

The week ahead, the Australian economic docket will feature the Producer Price Index (PPI) for the first quarter, which is expected to rise by 1.6%. On a yearly basis is estimated to increase by 4%. On the US docket, the Fed’s favorite gauge of inflation, the Core Personal Consumption Expenditure (PCE), is estimated to downtick to 5.3%, while the headline is estimated to rose near the 7% threshold.

AUD/USD Price Forecast: Technical outlook

The AUD/USD remains downward biased, as illustrated by its daily chart. Both MACD lines are heading south while its histogram is expanding to the downside, even though the AUD/USD jumped off monthly lows around 0.7050, shy of February’s 4 cycle lows around 0.7051.

The AUD/USD 1-hour chart depicts the pair is consolidating near the 0.7100 figure. The last three days’ AUD/USD price action formed a falling wedge, briefly broken downwards, though the major recovered and reclaimed the bottom-trendline. However, the hourly simple moving averages (SMAs) above the spot price could keep the pair downward pressured.

That said, the AUD/USD first support would be 0.7100. Break below would expose the confluence of February’s four daily low and the S2 daily pivot at 0.7051, followed by February’s 1 daily low at 0.7033, followed by the S3 daily pivot at the triple-zero figure at 0.7000.