Australian dollar eyes Aussie retail sales

The Australian dollar is in negative territory on Thursday. In the North American session, AUD/USD is trading at 0.6382, down 0.30% on the day.

Retail sales expected to improve

Australia's retail sales for March are projected to improve to 0.4% m/m, following a 0.2% increase in February. The retail sales report will provide a snapshot as to how well Australian consumers are coping with the turbulence from US President Trump's tariff policy. Consumers are being squeezed by the high cost of living and elevated interest rates.

Australians go to the polls on Saturday. The government jumped on the drop in first-quarter core CPI, which dropped to 2.9%, below the 3% upper band of the RBA's target band and supports the case for a rate cut. Australia's finance minister said that the RBA is expected to lower rates four or five times this year, which would save householders hundreds of dollars on mortgage payments.

US GDP, Core PCE Price Index decelerate

In the US, first-quarter GDP was a disappointment. The economy contracted by 0.3%, following a strong gain of 2.4% in the fourth quarter and missing the market estimate of 0.3%.

On the inflation front, the Core PCE Price index, the Fed's preferred inflation indicator, came in flat, down from a revised 0.5% in the previous release. This was the first time since Oct. 2020 that core PCE inflation has failed to post a gain. Annualized, the index fell to 2.3% from a revised 2.7%.

Next up is nonfarm payrolls on Friday, with the markets bracing for a sharp drop to 130 thousand, after a gain of 228 thousand a month earlier. With the markets on edge, a surprise reading could have a strong impact on the movement of the US dollar on Friday.

AUD/USD Technical

• AUD/USD is testing support at 0.6392. Below, there is support at 0.6366
• There is resistance at 0.6428 and 0.6454