Welcome to Extreme Investor Network, where we provide unique insights and analysis on the stock market, trading, and Wall Street. Today, we are looking at the potential impact of key economic data on the AUD/USD currency pair and how investors can navigate the current market environment.
A larger-than-expected fall in the US dollar could drive buyer demand, while tighter labor market conditions may support wage growth and increase disposable income. This, in turn, could fuel consumer spending and demand-driven inflation. However, a more hawkish Fed rate path could raise borrowing costs and reduce disposable income.
While the labor market data will certainly influence the AUD/USD pair, the S&P Global Services PMI is expected to have a greater impact. Economists forecast the PMI to remain at 51.3 in May, but an unexpected increase could support buyer appetite for the US dollar.
The services sector plays a crucial role in the US economy, contributing over 70% to GDP. Rising inflation in the housing services sector remains a concern for the Federal Reserve, and any uptick in service sector activity and price trends could lead to investor anticipation of a Fed interest rate hike.
In addition to economic data, investors should also keep an eye on FOMC member speeches for insights on inflation, the economy, and the interest rate trajectory. FOMC member Raphael Bostic is scheduled to speak, which could provide further clarity on the Fed’s plans.
Looking at the short-term forecast for the AUD/USD pair, trends could be dictated by the US Services PMI and Fed speakers. Stronger-than-expected US services sector activity may increase bets on a September Fed rate hike, tilting monetary policy divergence in favor of the US dollar.
On the daily chart, the AUD/USD currently sits above the 50-day and 200-day EMAs, signaling a bullish outlook. A breakout above the $0.66500 handle could pave the way for a move to the $0.67003 resistance level, with further upside potential towards the $0.67500 handle. However, a drop below the $0.65760 support level could trigger a move towards sub-$0.65500.
With a 14-period Daily RSI reading of 53.76, the AUD/USD may have room to test the $0.67500 level before potentially entering overbought territory. As always, it’s important to consider US labor market data, the Services PMI, and Fed commentary when making trading decisions in the currency markets.
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