AUD/USD - Upbeat retail sales cap losses, RBA trims GDP forecasts

A slight beat on the retail sales figure is helping Aussie avoid sharp losses after the RBA trimmed GDP forecasts for 2017 and cautioned markets about the negative effect of the strong Aussie dollar. 

AUD/USD jumped to a high of 0.7962 in a knee jerk reaction to the retail sales figure before falling to a session low of 0.7934. 

A further rise in AUD would lower economic growth, inflation - RBA

The RBA statement on monetary policy says, “a further rise in the AUD would weigh over the economic growth and inflation”, and adds, “the recent appreciation has had a modest dampening effect on economic forecasts. 

The central bank trimmed the Dec 2017 GDP forecast to 2%-3%, held 2018 forecast unchanged at 2.75%-3.75% and raised 2019 forecast to 3%-4%. 

The downward revision of the current year GDP forecast has not had a major impact on the 10-year bond yield, which continues to hover around 2.634%; down 4.4 basis points on the day. The resilience in the yield is helping the AUD avoid sharp losses. 

AUD/USD Technical Levels

A break above 0.7966 [5-DMA + 10-DMA] would open up upside towards 0.80 [Weekly 200-MA]. An end of the week close above the key MA level could see the Aussie extend the rally to 0.8163 [May 2015 high]. 

On the lower side, support at 0.7892 [23.6% Fib R of 0.7328-0.8066] would expose 0.7855 [weekly 5-MA] and 0.7835 [April 2016 high]. 

A bearish price RSI divergence was confirmed earlier this week. The 14-day RSI has now turned lower from the overbought territory.  

FXStreet Chief Analyst Valeria Bednarik says, “the Aussie recovered from a daily low of 0.7914, helped by a recovery in commodities prices, but remains subdued, moving further away from 0.8000, and poised to extend its decline according to intraday technical readings, as in the 4 hours chart, the 20 SMA gains downward strength above the current level, whilst technical indicators have resumed their declines after correcting within negative territory. The pair still has a strong support at 0.7870, the level to break to confirm additional declines this Friday.”