Market Update on AUD/USD and Inflation Concerns
On Tuesday in European trading, the AUD/USD pair saw a 0.35% increase, trading at approximately 0.6945. This rise in the Australian dollar came as the US dollar struggled against other currencies, particularly ahead of the release of the Consumer Price Index (CPI) data for June, expected at 12:30 GMT.
As of now, the US Dollar Index (DXY), which tracks the dollar’s value against six major currencies, was down 0.1%, sitting at around 101.16.
Traders are keeping a close eye on inflation data, especially given recent statements from Federal Reserve officials indicating heightened concerns about persistent inflation, over unemployment issues. Federal Reserve President Christopher Waller suggested that sustained high inflation would signal a need for further financial tightening, rather than being dismissed as mere fluctuations.
In terms of expectations, it’s estimated that U.S. headline CPI growth moderated to 3.8% year-on-year in June, down from 4.2% in May. Meanwhile, the core CPI is projected to show a steady increase of 2.9%. Month-over-month, the headline inflation might dip by 0.1%, with the core figure anticipated to hold steady at 0.2%.
On a different note, the Australian dollar gained traction, bolstered by optimistic trade balance data from China. This data revealed a trade surplus of USD 125.62 billion, surpassing forecasted figures of USD 121 billion and the prior reading of USD 105.43 billion.
AUD/USD Technical Analysis
Currently, the AUD/USD is sitting at about 0.6943. However, the short-term outlook for the currency pair is somewhat negative, as it remains below the 20-day exponential moving average (EMA) of 0.6957. The failure to recover this short-term EMA indicates potential ongoing selling pressure. The relative strength index (RSI) stands around 44, which suggests a slight negative momentum without hitting any oversold levels, implying that while sellers are active, they lack significant strength.
On the resistance front, immediate hurdles can be found at the 20-day EMA level of 0.6957. For any positive shift, the daily closing price needs to exceed this level. Should the pair move above the EMA, it could rise towards the June 23 high of 0.7006. Conversely, a drop below the March low of 0.6904 could see the pair slide toward the January 7 peak of 0.6766.
Economic Indicators
The forthcoming trade balance figures from China are anticipated to bring volatility to the foreign exchange market. This balance reflects the overall imports versus exports of goods and services, and a positive value indicates a trade surplus. A robust trade balance is generally viewed as favorable for the yuan and can also impact global economic sentiment.
