AUD/USD Forecast: Risk-related sentiment to take its toll on the aussie

AUD/USD Current Price: 0.6937

• Australian consumer sentiment deteriorated in May, according to the Westpac Leading Index.
• Fed chair Powell's comments revived concerns about inflation and a potential recession.
• AUD/USD has room to weaken on renewed selling pressure below 0.6910.

The AUD/USD pair fell on Wednesday and bottomed at 0.6880 but managed to trim most of its intraday losses to end the day at around 0.6930. A worsening market mood at the beginning of the day pushed the greenback higher, although demand receded ahead of US Federal Reserve Chair Powell. Powell testified on monetary policy before Congress, repeating the central bank is focused on taming inflation.

Australia data did not help, as the May Westpac Leading Index resulted at -0.06%, signaling a significant economic slowdown amid a deterioration in consumer sentiment. On a positive note, higher commodity prices offset the sentiment's slide. Early on Thursday, the focus will be on the preliminary estimate of the Australian S&P Global PMIs. The services index is expected to have plunged into contraction territory to 49.1, while the manufacturing index is seen down to 54.7 from 55.7 in May.

AUD/USD short-term technical outlook

The AUD/USD pair is at risk of extending its slide, according to the daily chart. It continues to develop well below all of its moving averages, while technical indicators gained bearish momentum within negative levels. Furthermore, the pair settled below the 23.6% retracement of its latest daily slump at 0.6950, an immediate resistance level.

For the near term, technical readings in the 4-hour chart also favor the downside. The pair met intraday selling around a mildly bearish 20 SMA, which currently converges with the aforementioned Fibonacci resistance. Technical indicators, in the meantime, lack directional strength but remain below their midlines. A lower low for the week will become more likely if the pair falls again below 0.6910, an immediate support level.

Support levels: 0.6910 0.6880 0.6840

Resistance levels: 0.6950 0.6990 0.7030

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