The outlook for AUD/USD remains bullish, driven by a weakened US dollar, which is under pressure following disappointing retail sales data and delays in the implementation of President Trump’s reciprocal tariffs. However, concerns over an upcoming Reserve Bank of Australia (RBA) rate cut are weighing on the Australian dollar.
Dollar Weakens After Disappointing US Retail Sales
The US dollar saw significant weakness last Friday after US retail sales for March plunged by 0.9%, far worse than the expected 0.2% decline. This sharp drop in consumer spending suggests a slowdown in the US economy, which may compel the Federal Reserve to consider cutting interest rates to support economic growth.
In addition to the poor retail sales report, the dollar faced further pressure last week due to President Trump’s decision to delay the implementation of reciprocal tariffs. This move, which followed his announcement that a thorough investigation into trade imbalances was needed, alleviated some trade war fears. As a result, market sentiment improved, benefiting risk-sensitive assets like the Australian dollar.
RBA Rate Cut Concerns Weigh on AUD
Despite the dollar’s weakness, the Australian dollar faces some headwinds as traders anticipate a likely rate cut by the Reserve Bank of Australia (RBA) on Tuesday. A rate cut, coupled with a dovish tone from the central bank, could dampen the Aussie’s upward momentum in the short term.
Technical Outlook: Bulls Eye New Highs
From a technical perspective, the AUD/USD pair has recently surged to new highs, breaking through the 0.6300 resistance level and trading well above the 30-day simple moving average (SMA), signaling a clear bullish trend. The Relative Strength Index (RSI) is approaching overbought territory, reinforcing the strong bullish momentum.
The price found solid support at the key 0.6100 level, and after a brief consolidation below 0.6300, the breakout suggests that bullish momentum remains strong. However, the pair is nearing the key psychological level of 0.6400, where it could face some resistance or a temporary pullback.
If the price pauses at 0.6400, it could provide an opportunity for a retest of the 30-SMA support. A successful rebound from this support would likely signal that the uptrend will continue, pushing the pair beyond the 0.6300 level. Conversely, a break below the SMA would indicate a shift in sentiment, possibly marking the end of the bullish rally.
In summary, while the dollar’s weakness and positive risk sentiment continue to support AUD/USD, the looming RBA rate cut and technical resistance levels could lead to a pause in the rally. Market participants will be closely watching the upcoming RBA decision and key technical levels for further direction.
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