AUD/USD escalates above 0.6800 following Retail Sales data from the US

The AUD/USD traded in the 0.6790 – 0.6838 range, holding daily gains.
Retails Sales in the US increased in June but were below expectations.
RBA minutes showed board members adopted a cautious stance.

On Tuesday, the USD faced additional selling pressure following soft Retail Sales and Industrial Production data from June, which helped the AUD/USD clear daily losses and jump back above 0.6800. Following the data, US Treasury yields are in decline, applying further pressure on the Greenback.

Investors assess Retail Sales data from June

The US Census Bureau reported that the Retail Sales from June increased by 0.2%, lower than the 0.5% expected and the previous 0.5% monthly increase. Due to the signs of weakness in the US economy following soft inflation readings, US Treasury bond yields decreased. The 2-year yield fell to 4.70%, while the 5 and 10-year rates fell to 3.95% and 3.75%, respectively.

US Industrial Production data from the Board of Governors of the Federal Reserve also undershot expectations, coming out at -0.5% versus the flat 0.0% reading forecast and repeating the 0.5% decline witnessed in May. The data further underscores the cool down that appears to be happening in the world’s largest economy.

On the other hand, the Reserve Bank of Australia (RBA) released its July meeting minutes, which showed that members agreed to pause policy due to the uncertainty around the economic outlook and the significant tightening up to the date. Regarding the next movements, the minutes showed that the board would reassess the economic situation in the next meeting in August. According to the World Interest Rates Probabilities (WIRP), markets are discounting a 25 basis point (bps) hike in the next meeting and bet on high probabilities of similar hikes in September and November.

AUD/USD Levels to watch

The daily chart suggests that the technical outlook for the AUD/USD has turned neutral for the short term. The Relative Strength Index (RSI) has a positive slope above its midline, while the Moving Average Convergence Divergence (MACD) prints lower green bars. In the 4-hour chart, there is also no clear dominance, as indicators are somewhat flat. However, on the bigger picture, the pair trades above its main daily Simple Moving Averages (SMAs) of 20,100 and 200-days, suggesting that the bulls are in command on the bigger picture.

Resistance Levels: 0.6840,0.6850,0.6890.
Support Levels: 0.6790,0.6740, 0.6715 (20-day SMA).