AUD/USD firms as DXY slips despite solid US Retail Sales

• AUD/USD up 0.36% to 0.6519 after bouncing from 0.6488 low.
• US July Retail Sales up 0.5% MoM, driven more by prices than higher volumes.
• UoM Consumer Sentiment falls to 58.6; inflation expectations jump to 4.9% (1-year) and 3.9% (5-year).

AUD/USD advances earlier during the North American session as the Greenback trims some of its gains achieved post-hot PPI figures, even though Retail Sales hint that the US economy is solid. The pair trades at 0.6519 after bouncing off daily lows of 0.6488.

Aussie lifts off daily lows as weak consumer sentiment offsets strong US spending data

Market mood remains positive after the US Department of Commerce revealed that July's Retail Sales rose by 0.5% MoM following an upwardly revised print of June of 0.9% as economists estimated a rise of 0.5% for the past month. Sales benefited from rising prices, rather than volumes.

Other data from the US showed that Consumer Sentiment weakened in August, according to the University of Michigan (UoM) poll, as the index fell from 61.7 in July to 58.6, missing forecasts for an improvement of 62.0. Joanne Hsu, the director of the Surveys of Consumers, said, "This deterioration largely stems from rising worries about inflation."

Inflation expectations for one year jumped from 4.5% to 4.9%. For five years, the rate rose from 3.4% to 3.9%.

The US Dollar Index (DXY), which tracks the performance of the buck's value against a basket of six currencies, falls 0.44% to 97.76, a tailwind for the Aussie Dollar.

Last week, the Reserve Bank of Australia (RBA)'s cautious cut of 25 basis points (bps) to 3.6% was widely expected. The improvement in labor data shows signs of recovery in the economy. UBS analysts, in a note, commented, "We maintain our view of a cautious easing path for the RBA. We still expect two follow-up 25bps cuts in November and February, taking the terminal rate to 3.1% this cycle. We reiterate our AUDUSD forecast of 0.68-0.70 by mid-2026."

Next week, the economic docket is light, though worldwide flash PMIs and the Fed Chair Jerome Powell's Jackson Hole speech would be eyed for clues regarding the path of interest rates in the US.

AUD/USD Price Forecast: Technical outlook

After recovering some ground at the end of July, the AUD/USD pair topped at around 0.6567, before aiming lower, facing key resistance at the 50-day Simple Moving Average (SMA) at 0.6520. On the downside, the next support to be tested is the 20-day SMA at 0.6514, which, if cleared, opens the door for 0.6500. The next key support lies at the 100-day SMA at 0.6448.

On the upside, the next resistance is the weekly peak of 0.6567, ahead of 0.6600.