AUD/USD remains under pressure despite RBA's hawkish tone

Summary:

AUD/USD has formed an inverted head-and-shoulder pattern, which is a bullish formation. Australian GDP has come in better-than-expected.

AUD/USD is trading along 0.7750 after better-than-expected Australian GDP data. According to the Australian Bureau of Statistics, GDP grew by 1.8% in Q1’21. While it is higher than the forecasted 15%, it is significantly lower than the 3.2% recorded in 2020’s last quarter. On a year-on-year basis, the GDP rose by 1.1% compared to the expected 0.6%. In the previous quarter, it had dropped by 1.0%.

As a commodity currency, the Australian dollar has gained strength from the rising demand from China. On Tuesday, the Australian Industry Group (AIG) noted that that the manufacturing index rose to 61.8 in May from 61.7 in April. A number above 50 is usually an indication that the manufacturing sector is expanding.

However, AUD/USD is under pressure after the better-than-expected US ISM manufacturing PMI. Economists had expected a reading of 60.9; two points from the prior month’s 60.7. However, May’s figure came in at 61.2, which is an indication that the country’s manufacturing sector is expanding.

AUDUSD technical outlook

AUD/USD is down by 0.05% at 0.7748. On a 4-hour chart, it is trading slightly above the 25 and 50-day exponential moving averages. Besides, it has formed an inverted head-and-shoulder pattern, which is usually a bullish formation. Based on these indicators, the currency pair is likely to rally to 0.7800; an important resistance level in May.

However, we cannot rule out the probability of AUD/USD retreating in the ensuing sessions. Earlier in May, it formed the head-and-shoulder pattern. The bearish formation lasted for the better part of the month. As such, while the hawkish RBA interest rate decision has helped strengthen the Australian dollar, the current neckline of 0.7731 may become its resistance level.