- AUD/USD takes a hit, trading around 0.6505 as US debt ceiling talks fail to close and tech stocks gain strength on growing interest in AI.
- The US economy is demonstrating resilience with robust retail sales, industrial production and a firm labor market, facing rising initial jobless claims.
- Debt ceiling deadlock raises concerns about US AAA rating; Yellen warns of potential financial distress by June.
AUD/USD tanks as Thursday’s North American session begins amid mixed conditions market sentimentwith the US debt ceiling debate taking center stage, while the AI craze has taken tech supplies higher. Meanwhile, the United States (US) economy is proving resilient, according to recent data releases. At the time of writing, AUD/USD is trading around 0.6511 after hitting a six-month low of 0.6503.
The US economy is showing resilience to a better labor market and GDP growth; Australia’s economy is facing pressure
US economic data showed that Initial Unemployment claims they rose 229,000 in the week ended May 20, below estimates of 245,000, according to data from the U.S. Labor Department. The US economy gained strength as retail sales, industrial production, business activity and a “tight” labor market supported the US dollar (USD). In a separate report, the US Bureau of Labor Statistics (BLS) showed that the second estimate of gross domestic product (GDP) for the 1st quarter was revised from 1.1% to 1.3%.
Meantime, American dollar The index, which measures the dollar’s performance against a basket of six currencies, is up 0.21% for four consecutive trading days at 104.103. It should be said that a double bottom chart pattern is emerging with an upside break above 105.883 which will confirm the pattern.
You must read: US Dollar Index: Regains 200-day EMA, breaks 2017 annual high as bulls enter 104,000
Negotiations on the US debt ceiling have reached an impasse as the White House (WH) and the US Congress, led by Speaker of the House Kevin McCarthy, failed to reach an agreement that could raise the US ceiling to allow the country to pay its obligations, which according to the Treasury Secretary US Janet Yellen saying the US will run out of cash by June 1st. Some of the consequences of the political drama in Washington provoked a reaction from the Fitch Rating agency, which warned that America’s AAA rating is at risk.
AUD/USD remains under pressure due to a lack of catalyst on the Aussie front. A note from the Reserve Bank of Australia (RBA) showed the central bank’s confidence is higher ratesinflation and income tax would contribute to a slowdown in consumer spending.
Additionally, China’s economy losing momentum would likely keep AUD/USD tilted to the downside. According to Bloomberg, “Recent data suggest gross domestic product growth this year will be closer to the government’s target of around 5%, defying expectations of a big overshoot created at the start of the year.
AUD/USD Price Analysis: Technical Outlook
From daily diagram the outlook is AUD/USD neutral to bearish, with a clear path to challenge the daily low of 10 November 0.6386, but first, the AUD/USD pair must break below crucial support levels. The first would be 0.6500. A decisive break will reveal 0.6400 before testing the above area at the 0.6200 handle. Otherwise, if AUD/USD stays above 0.6500, the psychological value of 0.6600 is up for grabs.
