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  • AUD/USD keeps losses even as Australia’s Business Confidence improves for second straight month in May.
  • Business Confidence still remains at levels last seen during the 1990 recession. 
  • AUD/USD rally looks overstretched, according to technical indicators.

The Aussie dollar is struggling to cheer the improvement in the Business Confidence and Business Conditions in May highlighted by the National Australia Bank’s survey released at 01:30 GMT. 

NAB indices bounce

Australia’s Business Confidence index rose to -20 in May from April’s -46, beating the forecasted rise to -32. Meanwhile, the Conditions index rose to -24 from -34 but missed the forecast of -16. 

While Business Confidence has improved for the second month in a row, it still remains at levels last seen around the trough in the 1990s recession, as tweeted by ABC business reporter David Taylor. 

As a result, AUD/USD continues to trade in the red near 0.7005. The pair hit a high of 0.7043 in early Asia and printed a low of 0.6988 a few minutes before press time. 

Looking forward, a deeper pullback could be seen, as key technical indicators like the 14-day relative strength index is reporting overbought condition. The pair has rallied by over 2,000 pips over the last 2.5 months on Federal Reserve’s unprecedented liquidity injections and the resulting risk-on rally in the US and global stock markets. The S&P 500 is now up over 35% from the lows reached in March. 

Additionally, the recent easing of lockdown restrictions played a role in strengthening the bid tone around the Aussie dollar. 

Technical levels

 

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