The Australian Dollar (AUD) has seen a slight increase, trading at about 0.6960 against the US Dollar (USD) during the European trading hours on Tuesday. This small rise comes as the US Dollar experiences some pressure, influenced by a drop in US Treasury yields ahead of the release of the Consumer Price Index (CPI) data for September, set to be announced on Wednesday.
Currently, the US Dollar Index (DXY), which tracks the currency’s value against six major currencies, is down by 0.16%, hovering around 102.40. Interestingly, while it has dipped, the DXY is still close to its recent yearly peak of 102.61 reached on Monday. Meanwhile, the yields on 10-year US bonds have fallen by 0.85%, nearing 5.20%.
The upcoming US CPI report is anticipated to indicate that the headline inflation rate has risen to 3.7% Year-on-Year (YoY), up from 3.4% in August. Additionally, the core CPI, which excludes the more volatile food and energy prices, is expected to increase to 2.5% YoY from the previous figure of 2.4%.
Investors are likely to scrutinize the US CPI data closely since it is expected to have an impact on interest rate expectations from the Federal Reserve (Fed). As it stands, traders are pretty confident that the Fed will maintain the current interest rates in its policy meeting later this month.
On the Australian Dollar front, market players are looking forward to China’s CPI data and the employment figures from Australia for September, both of which are due on Wednesday and Thursday, respectively.
AUD/USD Technical Analysis
Looking at the daily chart, the AUD/USD is trading at 0.6960, maintaining a slightly bearish outlook in the near term since it remains below the 20-day exponential moving average (EMA) at 0.7009. The pair hasn’t managed to regain this short-term trend marker, suggesting any upward movements might be limited for now. Additionally, the Relative Strength Index (14) sits at 37.6, indicating there’s still downside pressure rather than being outright oversold.
For upward movement, initial resistance is seen at the 20-day EMA at 0.7009, and a sustained break above this level would be necessary to relieve some of the current bearish pressure and pave the way for a stronger recovery. On the downside, the low from October 1st at 0.6904 is a crucial support level; breaking below this level would expose the pair to further declines, potentially reaching the June low of 0.6865.
