AUD/USD bulls fishing for a bottom in the 0.7550 region

• Bulls are trying to slow down the strong downtrend establishing a range in the 0.7550 region.
• Friday’s better than expected US inflation and GDP failed to impress AUD/USD bears. 

The AUD/USD is trading at around 0.7567 up 0.16% on the last day of the week as the European forex session came to a close. 

The AUD/USD is trading in a small range since Wednesday between the 0.7530 and the 0.7590 level. The Aussie suffered greatly in the last two weeks losing 280 pips in a sharp move down. The fall was led by USD strength as the rise of the US 10-year Treasury yields, to 4-year’s high, prompted strong US dollar demand. However, the euphoria in yields is progressively abating as the 10-year benchmark is retreating from the high made at 3.031% made on Thursday.

The US dollar is in a strong uptrend and the data which came out on Friday should further reinforce the positive sentiment on the buck. The inflation data came above expectations. It is worth mentioning that the Personal Consumption Expenditure (PCE) is the favorite inflation indicator of the Federal Reserve Bank. The core PCE for the first quarter came in above estimates at 2.5% versus 2.4% forecast while the Gross Domestic Product (GDP) for the first quarter annualized came in at 2.3% versus 2% forecast. All positive for the greenback.

The US Dollar index (DXY) is showing some signs of exhaustion but it would be unwise to call a top just yet, considering the strong uptrend backed by recent strong fundamental data. The market is buying USD as investors think that three to four rate hikes are on the table in 2018. 

Meanwhile, US stocks are fairly well supported, which further support AUD as US indices are positively correlated to the Australian dollar.

AUD/USD daily chart

The trend is neutral. Supports are seen at 0.7532swing low and at 0.7500 multi-month low while resistances are seen at 7590 swing high and at 7598 swing high.