Ella 
AUD/USD rallied sharply on Monday, rising 0.55% as market risk appetite improved, while intervention from Japanese authorities weighed on AUD/USD. After the opening of the Asian market on Tuesday, AUD/USD was at 0.6564, basically unchanged.
AUD/USD moves higher on optimism ahead of key Australian and US data
Wall Street closed higher and U.S. Treasury yields fell. Therefore, this weighs on the US dollar, making it volatile in an environment of light economic events. The Dallas Fed manufacturing index was -14.5 in April, compared with -14.4 in March. Market participants ignored the data and focused on the Federal Reserve’s monetary policy decision on May 1.
The Fed is expected to keep interest rates unchanged after Fed Chairman Jerome Powell made hawkish remarks, saying the “lack of progress in dealing with inflation” would be a reason to keep interest rates at higher levels for longer. After that, the swaps market has shown that traders expect the Fed to cut interest rates from six to five in early 2024.
Futures data from the Chicago Board of Trade (CBOT) show that market participants expect only 25 basis points of interest rate cuts by the end of the year.
Elsewhere, Australian economic events will include retail sales in March, which are expected to fall to 0.2% month-on-month from 0.3%, showing further weakness. AUD/USD is likely to head lower if the data is in line with expectations, but a move above the 200-day moving average (DMA) at 0.6524 could form the first level of support. Otherwise, if the data is positive, it could boost the Australian dollar, as strong retail sales mean the Reserve Bank of Australia (RBA) must keep interest rates at current levels.
In addition, traders will also pay attention to China’s purchasing managers’ index. As Australia’s largest trading partner, if China’s purchasing managers index data improves, it may affect the fluctuations of the AUD/USD.
