September 5, 2022 15:22:08

Despite favorable Retail sales data, the Aussie remains pessimistic. With a cautious market mood ahead of several central bank rate decisions the greenback remains in the high spirit.

The U.S. dollar index (DXY) scaled to new highs. It touched the 110.0 mark for the first time since 2002. The strength it the dollar weighed on the risk-bearing assets including the Australian dollar. Hawkish Fed comments and supportive U.S economic data supported the move in the U.S dollar.

In recent data, the job opening in the U.S. rose by 199,000 from June to 11.2 million in July, beating the market expectations of 10.45 billion. Further, the number of American filing claims for unemployment benefits reduced to 232K in the week ended on August 27 from a downwardly revised 237K in the previous week.

Moving on to the Australian data, Retails sales rose by 1.3% on monthly basis to a fresh record level of AUD 34.67 billion in July 2022. However, the gains were restricted as the Reserve Bank of Australia (RBA) is expected to increase cash rates by 0.5%, this would be the fifth consecutive increase that would put interest rates at 2.35%.

The Federal Reserve is expected to deliver another jumbo rate hike in September of 75bps, overshadowing other major central banks’ course of action.

On the daily chart, the AUD/USD pair consolidates below the 0.6800 mark. The descending trend line from the highs of 0.7125 acted as an upside barricade for the bulls. Further, the 21-day exponential moving average (EMA) at 0.6893.

However, the price found reliable support near the 0.6790-0.6800 zone. The formation of the Doji candlestick suggests a bounce back could be expected in the coming few sessions.

We expect an upside target of 0.6850 that coincides with the bearish trend line.

In contrast, a spike in sell order could reverse the course of action and could test 0.6720.