AUD/USD holds steadily as traders anticipate Australian Retail Sales, Fed’s decision

■AUD/USD advances on improved risk sentiment and the impact of Japanese intervention on the US Dollar.

■US economic data shows a slight decline in the Dallas Fed Manufacturing Index.

■The Federal Reserve’s is expected to maintain current interest rates on May 1.

■Upcoming Australian Retail Sales and China's PMI data could further influence AUD/USD movements.

The Aussie Dollar registered solid gains against the US Dollar on Monday, edged up by 0.55% on an improvement in risk appetite, while the Greenback was crushed by Japanese authorities' intervention. As Tuesday’s Asian session begins, the AUD/USD trades at 0.6564, virtually unchanged.

AUD/USD edges higher on upbeat mood, ahead of crucial Aussie and US data

Wall Street finished with gains, while US Treasury yields dropped. Consequently, that undermined the US Dollar, which was left adrift to an anemic economic calendar. The Dallas Fed Manufacturing Index in April was at -14.5 vs. -14.4 in March. The data was ignored by market participants, which are focused on the Federal Reserve’s monetary policy decision on May 1.

The US central bank is expected to hold rates unchanged, following hawkish remarks by Fed Chairman Jerome Powell, who commented that the “lack of progress on inflation” would be a reason to keep rates higher for longer. After that, the swaps market had priced out 5 rate cuts from the six foreseen by traders at the beginning of 2024.

Futures data from the Chicago Board of Trade (CBOT) shows that market participants estimate a full 25 basis points (bps) rate cut by the end of the year.

Aside from this, Australia’s economic docket will feature March’s Retail Sales, which are expected to dip from 0.3% to 0.2% MoM, indicating further weakness. If the number comes as expected, the AUD/USD could drag lower, but after breaching the 200-day moving average (DMA) of 0.6524, that could be seen as the first support. Otherwise, an upbeat result could underpin the Aussie, as strong sales would mean the Reserve Bank of Australia (RBA) must keep rates at the current level.

Furthermore, traders would eye the release of China’s PMIs. As Australia’s largest trade partner, positive data could influence the Aussie Dollar’s path.

AUD/USD Price Analysis: Technical outlook

The AUD/USD is neutrally biased, but it could shift to neutral upwards if buyers reclaim the 100-DMA at 0.6584, followed by the latest cycle high seen at 0.6644, the April 9 high. Once cleared, that could open the door to challenge 0.6700. On the flip side, a drop below the confluence of the 50 and 200-DMAs at around 0.6523/33 opens the door for a retracement to 0.6500.