- China’s industrial output in April fell significantly short of expectations.
- China’s retail sales missed forecasts, surging by 18.4% instead of the expected 21.0% increase.
- The US dollar remained weak as the US debt ceiling standoff continued.
Today’s AUD/USD outlook is bearish. The Aussie dollar started with slight gains but later fell due to disappointing economic data from China, a key trading partner.
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Official data on Tuesday showed that China’s industrial output in April increased by 5.6% from the previous year, falling significantly short of expectations. Still, it was higher than the 3.9% gain in March. Retail sales also missed forecasts, surging by 18.4% instead of the expected 21.0% increase.
According to Sean Callow, a senior FX strategist at Westpac, “investor concerns over China’s outlook” are holding back the Aussie’s growth. He predicted Tuesday’s data would hurt the Australian dollar and push it down to around 0.6645, the lower end of its trading range.
On Tuesday, the US dollar remained weak as the standoff between Democrats and Republicans over raising the debt ceiling continued, increasing the possibility of a US default. Although the dollar had gained support last week, the looming borrowing limit became a top concern for investors this week.
Treasury Secretary Janet Yellen has warned that the US could reach the borrowing limit as soon as June 1. President Joe Biden expressed confidence in reaching a deal before he meets with congressional leaders on Tuesday.
However, Republican House of Representatives Speaker Kevin McCarthy stated that the two sides were still far apart.
AUD/USD key events today
Investors will watch retail sales data from the US, a leading indicator for consumer spending. A drop in sales would indicate decreased consumer spending and a slowing economy. The opposite is also true.
AUD/USD technical outlook: 0.6700 prompting a bearish turn
The bias for AUD/USD is bearish in the 4-hour chart. This is because the price trades below the 30-SMA while the RSI is below 50, supporting bearish momentum. The downtrend had initially paused at the 0.6650 support level, where bulls returned for a retracement.
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However, the pullback could not go beyond the 0.6700 resistance. This has allowed bears to return with renewed strength as they target the 0.6650 support. The downtrend will continue if bears cross below 0.6650, with the next target at 0.6576 support.
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