The Australian dollar’s rally has hit the pause button on Friday, after a disappointing release from Retail Sales. In Friday’s European session, the pair is trading at 0.7150, down 0.45% on the day. All eyes are on US Nonfarm Payrolls, which will be released later today. This event is a key market-mover, and we could see some volatility from AUD/USD after this release.
With the US dollar again showing signs of weakness this week, the Aussie took advantage and posted gains over four straight days, posting gains of 1.3% during that time. However, the rally has fizzled on Friday, done in by weak data. Australia Retail Sales fell by 4.0% in August, confounding analysts that had projected a strong gain of 3.2 percent. This reading comes on the heels of an interim release two weeks ago, which showed that retail sales declined by 4.2%. If consumers continue to hold tight to their wallets and purses, the economic recovery could become stalled and the Australian dollar could find itself under downward pressure.
Will RBA slice rates next week?
The Reserve Bank of Australia has held interest rates at 0.25% since March, in response to the Covid-19 pandemic which has hampered economic activity. However, the Guy Debelle, Deputy Governor of the RBA, hinted last week that the bank would cut rates again at its policy meeting next week. Will the RBA follow through and slash rates even closer to zero? If yes, traders can expect the Aussie to lose ground after the policy meeting, although any drop would likely be temporary, given the advance notice/hint from the RBA.
- There is resistance at 0.7210 This is closely followed by resistance at 0.7237
- AUD/USD broke below support at 0.7156 in the Asian session. Below, there is support at 0.7129
- AUD/USD continues to put downward pressure on the 10-day MA. If the pair breaks below this line, it would indicate a downtrend for the pair
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