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AUD/USD Could Correct Lower, US GDP Declines 4.8%

Key Highlights

  • AUD/USD rallied above the 0.6400 and 0.6500 resistance levels.
  • A crucial bullish trend line is forming with support near 0.6430 on the 4-hours chart.
  • The US GDP decreased at an annual rate of 4.8% in the first quarter of 2020.
  • The Euro Zone GDP could decline 3.5% in Q1 2020 (Preliminary) (QoQ).

AUD/USD Technical Analysis

In the past few days, the Aussie Dollar followed a strong bullish path above the 0.6250 pivot level against the US Dollar. AUD/USD broke a couple of key hurdles near 0.6400 to move into an uptrend.

Looking at the 4-hours chart, the pair even surpassed the 0.6500 resistance and settled above both the 200 simple moving average (green, 4-hours) and the 100 simple moving average (red, 4-hours).

During the rise, there was a break above a connecting bearish trend line with resistance at 0.6400. It traded to a monthly high at 0.6557 and it is currently showing a few signs of a downside correction.

An initial support is near the 0.6477 level. It is close to the 23.6% Fib retracement level of the upward move from the 0.6253 low to 0.6557 high. The main support is near the 0.6435 and 0.6420 levels.

There is also a crucial bullish trend line forming with support near 0.6430. Finally, the 50% Fib retracement level of the upward move from the 0.6253 low to 0.6557 high is near 0.6400.

If there is a downside break below 0.6400, the pair could continue to move down towards the 0.6250 pivot level. On the upside, there are a few hurdles near the 0.6550 and 0.6560 levels, above which the bulls are likely to aim a test of 0.6600.

Fundamentally, the US Gross Domestic Product Annualized report for Q1 2020 was released by the US Bureau of Economic Analysis. The market was looking for a 4% decline in the GDP.

The actual result was disappointing as the US Gross Domestic Product decreased at an annual rate of 4.8% in the first quarter of 2020.

The report added:

The decline in first quarter GDP was, in part, due to the response to the spread of COVID-19, as governments issued "stay-at-home" orders in March. This led to rapid changes in demand, as businesses and schools switched to remote work or canceled operations, and consumers canceled, restricted, or redirected their spending.

Overall, AUD/USD could correct lower, but it remains in an uptrend above 0.6430 and 0.6400 in the coming days.

Upcoming Economic Releases

  • Germany’s Unemployment Change for April 2020 - Forecast 76K, versus 1K previous.
  • Germany’s Unemployment Rate for April 2020 – Forecast 5.2%, versus 5.0% previous.
  • Euro Zone Gross Domestic Product Q1 2020 (Preliminary) (QoQ) - Forecast -3.5%, versus 0.1% previous.
  • US Initial Jobless Claims - Forecast 3500K, versus 4427K previous.