The US economy saw an expansion of 1.3% in Q1 2024, a significant drop from the 3.4% growth in Q4 2023. Additionally, initial jobless claims are expected to rise slightly from 215k to 218k in the week ending May 25. These figures indicate a potential slowdown in economic growth and could have implications for the global economy.
Tight labor market conditions in the US have been supporting wage growth, leading to an increase in disposable income. This upward trend in disposable income could potentially fuel consumer spending and drive inflation. However, a higher Fed rate path may result in increased borrowing costs, which could in turn dampen consumer spending and limit demand-driven inflationary pressures.
Key figures in the Federal Reserve, such as Fed Vice Chair John Williams and FOMC member Lorie Logan, are scheduled to speak, and their comments on inflation, the US economy, and interest rates could impact the market. The AUD/USD trends in the near term are likely to be influenced by US labor market data, inflation numbers, and central bank communications. A shift towards a more hawkish monetary policy stance in the US could strengthen the US dollar against the Australian dollar.
The AUD/USD pair has been trading above both the 50-day and 200-day Exponential Moving Averages (EMAs), indicating bullish price trends. A breakout above the $0.66500 level could lead to a test of the $0.67003 resistance level, with further potential gains towards $0.67500. On the other hand, a drop below the $0.66000 level and the 50-day EMA could signal a downward move towards the 200-day EMA and the $0.65760 support level. The current Daily Relative Strength Index (RSI) reading of 50.66 suggests that the AUD/USD pair may have room to move higher before reaching overbought conditions.
The US economic data and central bank communications play a crucial role in shaping the trajectory of the AUD/USD currency pair. Traders and investors need to closely monitor developments in the US economy, labor market conditions, inflation numbers, and central bank announcements to make informed decisions in the foreign exchange market.