AUD/USD holds gains despite strong US data

• AUD/USD peaked at a daily high of 0.6640 and then fell towards the 0.6600 area.
• US GDP from Q1 was revised up and Jobless Claims fell in the third week of June.
• Aussie benefits from strong Retails Sales data.

On Thursday, the AUD/USD – after jumping to a daily high of 0.6640 – retreated towards 0.6600 and then climbed back to 0.6630. The upward revision of US Q1 GDP figures and a decrease in Jobless Claims during the third week of June provided evidence of a robust economic recovery in the US. On the negative tone, Pending Home sales came in weak and limited the Greenback’s advance while the Aussie stayed resilient on the back of strong Retail Sales data reported in the Asian session which came in at 0.7% MoM vs the 0.1% expected.

Robust economic data supports a rate hike from the Fed in July

The US Bureau of Economic Analysis reported that the Gross Domestic Product (GDP) from the US from Q1 was revised to the upside to an annualized rate of 2% signaling a resilient American economy. In addition, Jobless Claims for the week ending in June 23 dropped to 239K vs the consensus of 265k and from the previous 265k. It’s worth noticing that on Wednesday, Jerome Powell, chairman of the Fed, stated that ongoing hikes driven by a strong labor market would be appropriate, so hawkish bets following the Jobless and GDP data are strengthening the USD.

In that sense, the US bond yields rallied across the board. The 2-year and 5-year bond rates led the way seeing 3.52% and 4.18% increases on the day to 4.87% and 4.13% respectively and both of them jumped to fresh cycle highs.

Meanwhile, as per the CME FedWatch Tool, the odds of a 25 basis points (bps) rate hike at the next Fed meeting in July jumped from nearly 80% to 90%. All eyes are now on Friday’s Core Personal Consumption Expenditures (PCE) data, the Fed’s preferred inflation gauge.

AUD/USD Levels to watch

According to the daily chart, the outlook for the AUD/USD has shifted towards a more neutral to bearish stance in the short term. The Relative Strength Index (RSI) has shown signs of improvement, though it is still in negative territory, as well as the Moving Average Convergence Divergence (MACD). However, the pair is trading below the 20,100 and 200-day Simple Moving Averages (SMA), which indicates that sellers have the upperhand. 

Support levels to watch: 0.6595,0.6585,0.6550.
Resistances: 0.6640, 0.6650,0.6665.

AUD/USD Daily chart