AUD/USD trades sideways as fundamental and technical factors weigh on price action

• AUD/USD whipsaws on mixed economic data and expectations for monetary policy.
• Australia's Retail Sales miss forecasts, but declining US inflation limits the losses.
• AUD/USD looks toward technical levels from historical moves for direction.

The Australian Dollar (AUD) is consolidating against the US Dollar on Friday as fresh domestic data and monetary policy expectations for the Reserve Bank of Australia (RBA) and the US Federal Reserve (Fed) continue to drive price action.

At the time of writing, the AUD/USD pair is struggling to find direction, held back by a combination of soft economic fundamentals and a technically capped range.

Australia's economy shows signs of weakness as US inflation softens

Australia's economic data releases on Friday came in weaker than expected across key sectors. Building Permits dropped 5.7% MoM in April, a sharper-than-expected fall that extends March's revised 7.1% decline. 

Retail Sales also slipped by 0.1%, missing forecasts for a 0.3% gain. While private sector credit picked up marginally, the broader takeaway is that demand remains soft and the recovery uneven.
Meanwhile, the US economy continues to show signs of resiliency. Friday's data confirmed that core Personal Consumption Expenditure (PCE) inflation remained stable at 0.1% MoM in April, with YoY figures moderating from 2.7% to 2.5%. 

The goods trade deficit narrowed significantly to -$87.62 billion, and Michigan Consumer Sentiment climbed to 52.2, its highest level since January. 

These data points reinforce the diverging monetary policy paths, with the Fed remaining in a "wait-and-see" mode, showing no urgency to cut, while the RBA appears increasingly cornered into easing.

AUD/USD technical levels form a firm range of confluency, raising the potential for a breakout

Despite the bearish macro backdrop, AUD/USD remains rangebound and technically indecisive. The pair is currently hovering around 0.6440, stuck just below the 61.8% retracement level of the 2020-2021 rally, holding at 0.6464.

AUD/USD daily chart

Over the past month, the pair has failed to sustain momentum above 0.6549, while also finding support just above the mid-point of the September to April decline at 0.6428. The 50-day Simple Moving Average (SMA), now rising toward 0.6356, offers nearby dynamic support should bearish pressure resume.

A break below 0.6428 would increase downside risk toward the 0.6338 zone and potentially 0.6307 (the 38.2% Fibonacci of the September-April move). On the upside, a close above 0.6463 would be required to challenge the top of the range and potentially test 0.6550 again.