The risk-off sentiment on Tuesday sent the Aussie sharply lower, along with commodities and stock indices. During the EU trading hours, the AUD/USD pair was down 0.8%, testing the psychological support of the 0.70 threshold.
AUD macro data disappoint
Earlier in the day, Australian Retail Sales for December showed a decline of 3.9% compared to the predicted -0.3% and the prior result of 1.9%.
Amid the country’s most severe COVID-19 epidemic, the market mood remains weak due to pessimism over a robust rebound in the Chinese economy. This more than compensates for the better-than-expected Chinese PMI readings for January and does nothing to please markets or give quick relief for the China-proxy Australian Dollar, at least for now.
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In other news, Reuters stated on Tuesday, citing ABC, that the commerce ministers of Australia and China are due to attend a video conference the following week.
Additionally, S&P Global Ratings maintained Australia’s AAA/A-1+ rating with a stable outlook. The fundamental cause for the global rating agency’s most recent inactivity may be related to Australia’s high inflation rate and improved relations with China. However, floods in the Pacific nation and the Reserve Bank of Australia’s (RBA) unclear tone appeared to have tested the optimism of rating experts.
US numbers are eyed, but the main focus is on the Fed
Later in the day, the US Employment Cost Index (ECI) for the fourth quarter (Q4) and the Conference Board’s Consumer Confidence index for January will be released. According to market opinion, the US Consumer sentiment index may rise. Still, an anticipated weaker print of the US ECI, to 1.1% from 1.2%, might bolster the dovish tilt around the Federal Reserve ahead of its monetary policy meeting this week.
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It looks like the recent rally has run out of steam, with investors taking profits from their long positions, dragging the price lower. Therefore, the next target could be near 0.6960, where the 21-day moving average is located (the red line). Moreover, the critical support of this uptrend is right now at 0.68, where the 200-day moving average (the blue line) and the medium-term uptrend line are converged.
On the upside, the resistance is firmly anchored at previous cycle highs near 0.7130, and bulls must push the Aussie above it to confirm the bullish bias.
AUD/USD daily chart, source: author´s analysis, tradingview.com
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