US Dollar Remains Unscathed Amid Pandemic Concerns; AUD/USD Trends Downward

Despite the prevailing concerns about the economic impacts of the pandemic, the latest economic reports from the United States suggest that the US dollar has not been affected negatively. For example, the recent Producer Price Index (PPI) report revealed a 0.1% decrease in the PPI for February, and the underwhelming core PPI has not impacted the dollar as expected.

Similarly, retail sales in the US decreased by 0.4% in February, lower than the anticipated 0.3% decline and 3.2% increase. Moreover, the Reserve Bank of Australia (RBA) has had a change of heart and has decided to adopt a dovish stance, indicating that the rate cycle may be ending.

This development suggests that the AUD/USD pair will likely trend downward. There are several significant economic events scheduled for the coming week. For example, on Thursday, Australia’s Employment Change and Unemployment Rate will be announced, providing critical insights into the current state of the Australian economy. Similarly, the US Initial Job Claims data on the same day will offer additional direction for the future of the US economy.

AUD/USD Technical Analysis

The AUD/USD pair is trending downwards based on technical indicators. The 20-day simple moving average is at 0.6747, a significant resistance level. On Wednesday, the closing highs aligned with the major trend line that has been declining since the beginning of February, suggesting that a bearish trend may be forming. The key support level is at the 0.6580 price level.

Moreover, the 50-day simple moving average adds to the pressure, indicating a bearish outlook. Currently, the RSI is at 36.970 on the daily chart, suggesting that the pair is dangerously close to oversold territory. The AUD/USD price is consolidating before further losses.

Regarding resistance levels, the pair’s intraday high at 0.6712 forms resistance at the 38.2% level at 0.6671. Additionally, the daily pivot is holding at the 0.6670 mark. Therefore, the pair’s resistance levels will range from 0.6709 to 0.6773.

Broader Market Watch

The S&P 500 experienced a decline, with a 1.46% dip on Wednesday, which caused the asset to end the day trading at 3,862.114. It follows the tech-heavy Nasdaq declining by over 0.75% and halting trading at 11,342, while the Dow shed 1.74% to end the day at 31,598.13. The broader collapse of the banking industry in the US triggered a heavy plummet in S&P 500 shares.

Investors still expect the Federal Reserve (Fed) to raise interest rates by 25 basis points (bp) despite the decline. According to the CME FedWatch tool, which tracks the probability of a rate hike, the odds are currently at 37%. As a result, investors believe the Fed will stick to its plan of gradually tightening monetary policy to combat inflationary pressures in the economy.

However, there are some signs of risk aversion in the market. The utility services and communications sectors are leading the rally, with both sectors seeing an uptick of over 0.25%. These sectors are typically seen as more defensive, as they provide essential services and have stable revenue streams. On the other hand, the energy sector saw a significant decline of over 6.18%.

Moreover, according to the EIA, the WTI futures market saw a massive 5% decline, marking the lowest level since December 2021. The decline is driven by concerns over the pile-up of oil reserves in the US, which has led to an oversupply of crude oil.