The monthly NAB Business Survey showed that the positive momentum which drove GDP growth of 1.3% y/y in Q1 is fading. Business confidence improved slightly but remains in negative territory and below its long-term average.

A sharp decline in capital expenditure was noted (now at the lowest level since June 2024), along with falling profitability and softer forward orders. The significant surge in capacity utilization recorded in March has also reversed; this metric fell to 81.4%, returning for the first time since mid-2021 to its long-term average. While labor cost growth remained steady this month, there was an increase in purchasing costs, as well as higher final product prices and retail price inflation.

Additionally, consumer spending growth in April slowed to just 0.1% after steady gains in previous months.

Although these incoming data alone are unlikely to change the Reserve Bank of Australia's (RBA) stance—focused on "gradual and cautious rate cuts"—they do suggest weaker market sentiment regarding future RBA policy moves. There are now more factors pointing toward a faster pace of rate reductions. So far, the RBA has made only one cut in February, and the current interest rate remains at 4.1%, while inflation has remained stable for two consecutive quarters at 2.4%—significantly below the RBA rate.

It has become evident that the economy cannot generate upward momentum at the current rate level, which is why a reassessment of the rate cut trajectory is likely to occur as soon as the upcoming RBA meeting on May 20. Expectations of a cut—and faster easing in the future—will put additional pressure on the Aussie and prevent it from sustaining a bullish momentum.

The net short position on AUD narrowed slightly during the reporting week by just $47 million, to -$3.14 billion. Positioning remains bearish, while the fair value estimate has lost upward momentum and is preparing to turn south, though it remains above the long-term average for now.

The AUD/USD pair failed to reach the resistance zone of 0.6540/50, and at this point, the odds of a resumed upward move have diminished. The nearest support zone lies at 0.6340/60; a test of this area will help determine whether there will be another attempt to move higher or whether, after a period of consolidation, a southward wave will develop. If the pair breaks below this support zone, the next target will be the technical level of 0.6287.