AUD/USD Current Price: 0.6538
- The AUD/USD broke a key support area and tumbled to the lowest level since November.
- A sharp decline in NZD and a slide in base metals dragged down AUD, despite an AUD/NZD rally.
- The US Dollar remains strong amid risk aversion, despite divisions at the FOMC.
The AUD/USD dropped sharply for the second day, falling to fresh year-to-date lows. The decline found support around the 0.6525 area, but the Aussie could not recover lost ground, showing that it remains under pressure amid risk-off flows.
The Reserve Bank of New Zealand (RBNZ) increased the key interest rate by 25 basis points to 5.5% and signaled the end of the tightening cycle. The New Zealand dollar tumbled after the decision, dragging down AUD/USD during the Asian session. AUD/NZD jumped over 150 pips from 1.0560 to 1.0725, the highest level since May 15.
Regarding Australian data, the Melbourne Institute has reported that “the monthly level of the Westpac-Melbourne Institute Leading Index of Economic Activity was 97.27 in April, down from a revised 97.30 in March. The six-month annualized growth rate of the Leading Index fell and is weak. The Leading Index currently suggests that the Australian economy will grow at a below-trend rate in the next 3 to 9 months.” No major reports are due on Thursday, and April Retail Sales will be released on Friday.
The US Dollar held onto daily gains across the board following the release of the FOMC minutes. The document suggests a division among policymakers regarding the next steps, as some members pointed out that more hikes are needed while others favor a pause. The greenback is supported by higher Treasury yields and a negative mood in the markets, while the Aussie lags amid a drop in base metal prices.
AUD/USD short-term technical outlook
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The AUD/USD weakened sharply after breaking under the 0.6560/70 area and resumed a downtrend that started in February from above 0.7100. So far, no signs of stabilization are seen, and the pair keeps looking for a new support level. Below the recent low at 0.6525/30, the next target is the 0.6500 zone, followed by 0.6450.
On the 4-hour chart, the Relative Strength Index (RSI) is well below 30, indicating oversold conditions that could point to more consolidation around 0.6535 before the next leg lower. If the pair recovers ground, the resistance area at 0.6580 could be seen as an opportunity for bears. Above that, the next resistance stands at 0.6610. The Aussie needs to rise above 0.6670 to remove the negative bias.
Support levels: 0.6525 0.6480 0.6445
Resistance levels: 0.6575 0.6605 0.6640
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