AUD steady despite soft retail sales

The Australian dollar has posted slight gains in the Friday session. AUD/USD is currently trading at 0.7256, up 0.28% on the day. It has been a good week for the Aussie, has market sentiment has improved. AUD/USD has gained 1.57% this week and is well into 72-territory.

Australia Retail Sales slides

Retail sales are the primary gauge for measuring consumer spending, a key economic driver. The news in Q2 was worse than expected, as Retail Sales underperformed, with a reading of -2.7% (est. -2.3%). This was significantly weaker than the Q1 release of -1.8%. However, investors shrugged off the soft numbers, as the Aussie is in positive territory.

Australia, which once was viewed with envy as the “Covid paradise”, has seen an upswing in new cases of the Delta Covid variant. On Thursday, Australia reported over 1,000 new cases, the highest total since the pandemic began in 2020. There are growing concerns that the economy could fall into a recession if Covid numbers continue to rise.

Australia’s economy showed solid expansion in the first quarter, with a gain of 1.8% (QoQ). However, there are concerns that growth may have slowed to below 1 percent in Q2. Australia will release GDP for Q2 on Tuesday. A weak GDP reading could curb the Australian dollar’s upswing.

The market focus will be on today’s Jackson Hole symposium, with a highly anticipated speech from Fed Chair Jerome Powell. Ahead of the meeting, three of the Fed’s most hawkish members urged the central bank to taper its asset purchases sooner rather than later. The three members, Robert Kaplan, James Bullard and Esther George, are non-voting members, but their message is reflective of strong support in the Fed to begin a taper shortly before or after December. However, their position is by no means unanimous in the Fed, and the markets are expecting a more dovish stance from Powell, which could translate into a weaker US dollar.

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AUD/USD Technical

• There is resistance at 0.7306, followed by 0.7473
• On the downside, 0.7225, a monthly line, is fluid. Below, there is support at 0.7103, protecting the round number of 0.7100

For a look at all of today’s economic events, check out our economic calendar. www.marketpulse.com/economic-event

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