AUDUSD at 3-Week Highs After US Data
27 May 2022
The USD traded broadly lower again on Friday as it looks like the recent bull market in the greenback could be over, pushing the AUDUSD pair to 0.7150, the highest level in nearly a month.
US data in focus
US personal spending soared (+0.9% MoM vs. +0.8% exp) while incomes grew only modestly (0.4% MoM versus 0.5% exp), meaning the savings rate collapsed to just 4.4%, its lowest level since September 2008. It looks like US consumers are certainly not ready for soaring prices and a recession.
Consumers in the United States continued to spend last month, even though inflation remained high, as one of the fundamental contributions to US economic growth held up into the spring. However, the personal saving rate fell to its lowest level in almost a decade, raising questions about how long spending can keep the economy afloat.
Finally, the essential part of today's data is the PCE Deflator, the Fed's preferred inflation gauge, which was projected to decrease in April. The headline print was hotter than expected, coming up at +6.3% YoY (vs. +6.2% projected and below the previous +6.6% print). Core PCE increased by 4.9%, as projected, although slower than March's +5.2% yearly.
"Overall, the US consumer still remains in great shape. They came into these price hikes, this inflation, with a cushion on their balance sheet. Certainly, employment is high, so the overall US consumer remains in a very strong place," Brent Schutte, chief investment officer at Northwestern Mutual Wealth Management said on Friday.
Bulls in charge
The following key resistance for the Australian dollar will be at 0.7170, where March lows are. If the Aussie jumps above that level, the medium-term outlook could change to bullish, targeting the 200-day moving average (the purple line) near 0.7260.
Alternatively, the support could be in the 0.71 - 0.7070 region, and as long as the pair trades above it, the short-term outlook seems bullish.