Australian Dollar Slips as RBA Cuts Rates Amid Sluggish Economic Data

 Key Takeaways:

*Australian dollar hammered by the latest Retail Sales Reading that came short. 

*RBA’s recent dovish tone has also hindered the Aussie dollar. 

The Australian dollar (AUD) continues to grapple with significant headwinds, driven by a confluence of underwhelming domestic economic indicators and evolving monetary policy dynamics. The latest retail sales data, registering a contraction of 0.1% month-on-month, marks the weakest performance since February, underscoring persistent softness in consumer spending. This disappointing figure has amplified concerns about the resilience of Australia’s economic recovery, particularly in the face of escalating global trade uncertainties.

In its recent monetary policy decision, the Reserve Bank of Australia (RBA) signaled heightened caution regarding the nation’s growth outlook, opting to reduce the cash rate by 25 basis points to a new low. This move aims to provide a buffer against external pressures, including volatile global trade conditions and geopolitical tensions, which have clouded the economic horizon. The RBA’s dovish pivot, while anticipated by markets, has intensified bearish sentiment toward the AUD, as investors recalibrate expectations for further monetary easing.

Compounding these challenges, the broader economic data landscape has offered little respite. Subpar performances across key indicators, including retail sales and business confidence, have further eroded market confidence in the AUD. The currency’s recent depreciation reflects not only the RBA’s accommodative stance but also the mounting pressure from lackluster domestic fundamentals.

Technical Analysis

GBPAUD, H4

The GBPAUD pair has continued its bullish trajectory in May, gaining over 2.3% month-to-date while maintaining a consistent higher-high and higher-low pattern. The technical structure reinforces a bullish bias, with the pair now approaching a key resistance at the 2.1100 level. A confirmed breakout above this threshold would mark a new monthly high and signal further upside potential.

Momentum indicators continue to support the bullish view. The Relative Strength Index (RSI) has remained firmly above the 50 mark for several weeks, reflecting sustained buying pressure. Meanwhile, the MACD holds above the zero line, indicating that bullish momentum remains intact.

With bullish sentiment prevailing and momentum indicators aligned, the pair could extend gains toward the next psychological resistance, particularly if it breaches 2.1100 decisively. However, traders may remain cautious of potential pullbacks should the pair face exhaustion near resistance.

Resistance Levels: 2.1100, 2.1270
Support Levels: 2.0900, 2.0670