The Australian Dollar holds steady following strong economic data from China, where retail sales rose 4% year-over-year. This positive sentiment is further bolstered by a new action plan from China aimed at reviving consumption. Market watchers anticipate the Federal Reserve will maintain its current policy in upcoming meetings, adding to the AUD’s strength against the US Dollar. Technical analysis indicates a bullish outlook for the AUD/USD pair with significant support and resistance levels under observation.

The Australian Dollar (AUD) has maintained its stability following the release of China’s latest economic data. In January and February, retail sales increased by 4% year-over-year, surpassing December’s growth of 3.7%. Furthermore, industrial production rose by 5.9%, beating the forecast of 5.3%, though slightly lower than the 6.2% recorded previously. Market sentiment has been buoyed as expectations build that the Federal Reserve will keep its current policy stance unchanged in its upcoming meeting.

China’s new special action plan to revive consumption has also positively influenced market sentiment, as it includes measures aimed at raising wages, boosting household spending, and stabilizing the stock and real estate markets. Such developments could bolster the Australian Dollar, given that China is a key trading partner for Australia. Additional support for the AUD/USD pair may arise from optimism regarding potential ceasefire discussions between US President Donald Trump and Russian President Vladimir Putin.

The US Dollar Index (DXY) is currently trading lower around 103.70, influenced by a decline in the University of Michigan’s Consumer Sentiment Index to its lowest level since November 2022. This drop is amidst growing concerns over inflation, with the five-year consumer inflation expectation rising to 3.9% in March. Despite predictions of a potential quarter-point rate cut by June from the Federal Reserve, investor sentiment remains cautious due to geopolitical uncertainties, including recent attacks by the Houthis in Yemen.

US Treasury Secretary Scott Bessent expressed confidence in the stock market’s resilience despite recent fluctuations resulting from trade tensions. In contrast, President Trump’s decision to maintain a 25% tariff on Australian aluminum and steel exports adds pressure on Australia’s economic outlook. However, Prime Minister Anthony Albanese has opted not to enact reciprocal tariffs, viewing them as detrimental to Australian consumers and inflation.

Current technical analysis indicates that the AUD/USD pair is trading at around 0.6340, maintaining a bullish outlook as it remains within its ascending channel. Immediate support levels are identified at the nine-day Exponential Moving Average (EMA) and the 50-day EMA. Should the pair break below these support zones, a bearish trend may emerge. Conversely, an upward movement could see the pair retesting its three-month high of 0.6408, last noted on February 21.

In summary, the Australian Dollar remains supported by positive economic indicators from China and strategic measures to enhance consumer spending. The expectations surrounding Federal Reserve policy also play into market sentiment, as does evolving geopolitical dynamics. The technical outlook for the AUD/USD pair suggests potential for further gains, although significant resistance and critical support levels must be monitored closely as market conditions can change rapidly.

Original Source: www.fxstreet.com

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