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- The AUD/USD is down for the third straight day as the risk-on sentiment returns
- The pair shrugged positive retail sales data from Australia.
- The overall retail sales rose by 7% in November leading to a YoY increase of 13.2%
The AUD/USD is down by 0.35% as the risk-on sentiment spreads across the market. By declining, the Australian dollar ignored the strong Australian retail sales numbers from the country.
Australia retail sales rebound
The retail sector is one of the essential industries in most countries because of the number of people it employs. It is also a key measure of household spending, which is a key component of the GDP calculation.
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The Australian retail sales bounced back in November as the number of new Covid infections in Victoria continued to fall. In total, sales rose by 7.0%, better than the previous month’s increase of 1.4%. The sales rose by 13.2% on an annualised basis. In a note, Ben James of ABS said:
“Victoria saw a large rise, up 21 per cent, as retail stores experienced a full month of trade following the easing of coronavirus restrictions in that state. Excluding Victoria, retail sales rose 2.7 per cent.”
The retail sales also rose because of the Black Friday event, where many companies offer large discounts. That led to a rise in clothing, footwear, and personal accessories. Household sales rose by more than 13%.
Therefore, the AUD/USD declined in part due to the new risk-off sentiment because of the new strain of coronavirus. The strain and the imminent travel bans have pushed the US dollar higher as more people rush to its safety.
Further, the pair is falling possibly because of profit-taking as the year comes to an end. Furthermore, bulls have benefited from a 38% increase of the pair from its March low at 0.5500.
AUD/USD technical outlook
The AUD/USD price reached a year-to-date high of 0.7630 last week. Since then, it has declined by more than 1% as traders worry about the emerging risks in the market.
The pair is still above the important support at 0.7415 and the 25-day weighted moving average. At the same time, it is getting overbought as evidenced by the Relative Strength Index (RSI), Stochastic oscillator, and the MACD. This is usually a sign of a reversal as you can see in our free forex course.
Therefore, there is a possibility that the pair will continue falling as bears aim for the next support at 0.7415. This trade will, however, be invalidated if the price moves above the YTD high at 0.7630.
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