The US economy saw a significant slowdown in the first quarter of 2024, with growth only expanding by 1.3% compared to the previous quarter’s 3.4% growth. Economists are also predicting an increase in initial jobless claims, which could impact consumer spending and inflation levels. With tight labor market conditions supporting wage growth, disposable income is on the rise, potentially fueling demand-driven inflation.
The Federal Reserve’s decision to maintain a higher-for-longer rate path could lead to an increase in borrowing costs, putting pressure on consumer spending. A decrease in consumer spending could dampen inflationary pressures driven by demand. Furthermore, comments from Fed officials regarding inflation, economic conditions, and interest rates could sway market sentiment and impact currency movements.
The AUD/USD pair is particularly sensitive to US economic data and central bank announcements. Stronger-than-expected inflation numbers and labor market conditions in the US could strengthen the US dollar relative to the Australian dollar. Currently, the AUD/USD pair is trading above its 50-day and 200-day Exponential Moving Averages (EMAs), indicating a bullish trend. A break above the $0.66500 level could signal a move towards the resistance at $0.67003, with further upside potential towards $0.67500.
Investors trading the AUD/USD pair should keep an eye on upcoming data releases, including housing sector data from Australia, announcements from the Reserve Bank of Australia (RBA), and the US economic calendar. A downside risk for the AUD/USD pair exists if it falls below the $0.66000 handle and the 50-day EMA, potentially leading to a test of the 200-day EMA and the $0.65760 support level. The Relative Strength Index (RSI) is currently at 50.66, suggesting a potential move towards the $0.67500 handle before entering overbought territory.
The US economic data releases and central bank announcements play a crucial role in determining the direction of the AUD/USD pair. Investors should closely monitor US economic indicators, inflation numbers, and comments from Fed officials to gauge the potential impact on the currency pair’s trends.
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