AUD / USD mixed as retail sales beat expectations
Australia Retail Talking Points:
- Australian retail sales rose 1.4% in March, up from an expected reading of 1%
- Aussie dollar was aiming higher in immediate trade, but faded
- AUD / USD may look to test 0.7800 again, reversing recent formation of a head and shoulders pattern
Australian retail sales rose 1.4% in March, well above the consensus growth of 1%. In immediate trade, the Australian dollar looked higher. Strong growth in retail sales has been fueled by the easing of lockdown restrictions across the country, as well as buying Easter holidays earlier than usual. With the Reserve Bank of Australia expected to remain very accommodating in the near term, the Australian economy appears poised to continue its strong recovery from the COVID-induced recession.
Preliminary data on retail sales in Australia
As mentioned, Aust Reserve Bankralia is in no rush to tighten monetary policy. Minutes from the last RBA meeting were released on Tuesday, with some members of the Monetary Policy Committee (MPC) indicating their desire to remain accommodative until inflation and jobs targets are met. Earlier comments by Philip Lowe, governor of the RBA, revealed that the current political framework could remain in place until 2024 so that the RBA can fulfill its mandate.
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How to trade AUD / USD
The potential for an AUD / USD pop remains, as lower US Treasury yields could provide the springboard needed for the pair to test recent resistance around 0.7800. An accommodating Federal Reserve, combined with the recent downturn in US equity markets, could lead to sustained inflows of US bonds, leading to lower yields. As yields have skyrocketed in recent weeks, it appears that the “oversold” conditions for US bonds have dissipated, which could allow some weakness in the USD. While the longer term trend for US yields remains upward, the recent pullback may allow AUD / USD to explore higher levels.
AUD / USD daily chart
Chart created with TradingView
— Written by Brendan Fagan, Intern for DailyFX
Contact Brendan, use the comments section below or @BrendanFaganFX on Twitter