Australian dollar futures 6A

Australian Dollar Futures (6A) May Test 0.7000 amid Soft USD

  • On Monday, China’s macro data disappointed, which prompted fresh selling of the Australian dollar.
  • Another contributing factor to the Australian dollar’s soft tone was risk sentiment.
  • US bond yields fell, giving dollar bulls more reason to retreat.

The Australian dollar futures (6A) pair remained on the defensive during the first half of the European session. The currency was last trading near 0.6900 with modest intraday losses.

As a result of China’s shockingly weak macro data, the Australian dollar futures met fresh offers and reached intraday lows of 0.6890. Data showed the damage that the COVID-19 lockdown was causing to the world’s second-largest economy and led to a decline in the Australian dollar.

The Ukraine conflict and China’s COVID-19 policies fuel fears of a slowdown in the economy amid more aggressive Federal Reserve tightening. This dampened investors’ appetite for perceived riskier assets, resulting in a weaker stock market, further devaluing the Australian dollar.

A recent peak of 3.20% on benchmark 10-year Treasury yields has been pushed back by the anti-risk flow. In addition, the drop in the US dollar put the bulls on the defensive and supported the Australian dollar. Fundamentally, however, the downward trend has persisted for about a month now.

Ahead of the beginning of the North American session, participants are eagerly awaiting the release of the US Empire State Manufacturing Index. As a result, the US dollar’s price momentum may be driven, along with US bond yields. Short-term opportunities in the Australian dollar can be considered with a broader market risk stance.

On Tuesday, the Reserve Bank of Australia released its monetary policy meeting minutes. Data on retail sales and industrial production will be released later that day. Furthermore, remarks from several FOMC officials, including Fed Chair Jerome Powell, are being scrutinized for signs of a 75-basis point rate hike that would boost demand for the US dollar and set a short-term course for the Australian dollar.

Australian dollar futures (6A) technical analysis:

Australian dollar futures (6A) 4-hour chart
Australian dollar futures (6A) 4-hour chart

The Australian dollar continues to trade around the 20-period SMA on the 4-hour chart. The outlook remains bearish as the buyers find no traction around the current levels. The upside attempt may remain capped by a 50-period SMA around 0.7000.  On the downside, the key support emerges at 0.6829, which is the recent swing low for the Australian dollar.