AUD/USD struggles at 0.7100 as bulls take a breather around 0.7090s

The AUD/USD is almost flat during the North American session after trading in a 0.7057 low to 0.7109 high trading range, amid a risk-on market mood that keeps US equities buoyant while safe-haven assets retraced. At 0.7090, the AUD/USD is poised to finish the day with minimal gains.

Sentiment remains positive after Wednesday’s release of the Federal Reserve’s May meeting minutes. The US central bank stated that all participants agreed to rate raises of 50 bps in the next couple of meetings and mentioned that they need to move “expeditiously” to a neutral posture. Also, officials said they would remain focused on inflationary pressures, much In line with the Fed speaking rhetoric, since May 5.

Meanwhile, the US Dollar Index slumps some 0.20% during the North American session, sitting at 101.877, opening the door for a fall towards April 21 daily low at 99.818. US Treasury yields recovered some ground, led by the 10-year benchmark note, which appears to have bottomed just shy of the 50-day moving average (DMA), and is gaining two basis points, sitting at 2.768%.

During the Asian session, China’s Premier Li Keqiang sound the alarm about the slowing economy. He made comments to local officials in an emergency meeting. He said that growth risks were slipping below a “reasonable” range and warned that China would face a much longer road to recovery if the economy doesn’t keep expanding at a certain rate.

Those remarks put a lid on the AUD/USD, which was headed to record a fresh weekly high above the current one at 0.7127, eyeing a test of March’s 15 swing low at 0.7165.

Regarding US macroeconomic data, the docket featured Gross Domestic Product (GDP) preliminary figures for the first quarter, which showed a contraction of 1.5% YoY, much larger than the -1.3% expected. Trade dynamics weighed on the readings, as Exports fell at a 5.4% pace in Q1, while Imports skyrocketed 18.3%. Nonetheless, consumer spending increased by 3.1% vs. estimations of 2.7% YoY. Also, the Labor Department reported Initial Jobless Claims for the week that ended on May 20, which rose 210K, lower than the 215K foreseen.

The Australian economic docket would feature Retail Sales on its preliminary reading, foreseen at 0.9% MoM on Friday. On the US front, the economic docket would reveal the Fed’s favorite measurement for Inflation, the Personal Consumption Expenditure (PCE), foreseen at 6.4%, triple the US central bank objective.

AUD/USD Price Forecast: Technical outlook

The AUD/USD remains downward biased in the mid to long term. In the short term, the 20-day moving average (DMA), spotted at 0.7034, suggests the major is trending higher, but it’s worth noting that the four-day rally was capped at the 0.7100 figure, meaning that it might be ending. Further confirmation was provided by oscillators, which are trending lower within a bearish territory.

That said, the AUD/USD first support would be the 20-DMA at 0.7034. A break below would expose the May 18 cycle low at 0.69490, followed by the YTD low at 0.6828.

Key Technical Levels