The AUD/USD currency pair experienced a slight decline against the USD as US Treasury yields made a recovery, lending support to the Greenback. However, market expectations of a more dovish stance from the Federal Reserve (Fed) following soft inflation data from June suggest that the pair is poised for further upside.
The Core Consumer Price Index (CPI) in the US for June reported a decline to 4.8% YoY, while the Core Producer Price Index (PPI) slipped to 2.6% YoY during the same period. These figures, combined with the market’s perception that another rate hike beyond the July meeting is unlikely, caused US Treasury yields to decline and put significant selling pressure on the USD.
On the positive side, the University of Michigan (UoM) reported an increase in its Consumer Confidence Index to 72.6 in July, up from the previous reading of 65.5. This data provided some support for the USD amidst the challenging week.
Looking ahead, investors will closely monitor upcoming labor market data from Australia, including Employment Change and Unemployment rate figures for June, set to be released next Thursday. Additionally, the Chinese government’s anticipated announcement of stimulus measures to boost their economy will be an important factor to watch. Moreover, the recent appointment of Deputy Governor Bullock as the new Governor of the Reserve Bank of Australia (RBA), starting on September 18, adds to the evolving landscape.
In terms of technical analysis, despite Friday’s minor downside movements, the AUD/USD outlook remains bullish in the short term. The Relative Strength Index (RSI) and Moving Average Convergence Divergence (MACD) indicators are strong in positive territory, while the pair continues to trade above the 20, 100, and 200-day Simple Moving Averages.
Key levels to watch for the AUD/USD pair include resistance at 0.6900 (June high), 0.6950, and 0.6980. On the downside, support levels can be identified at 0.6785, 0.6750, and the 20-day Simple Moving Average at 0.6715.
The AUD/USD currency pair is expected to see further upside potential as the Federal Reserve adopts a more dovish stance in response to soft inflation data. The market’s perception that another rate hike beyond the July meeting is unlikely has put pressure on the USD, which is beneficial for the AUD/USD pair. Additionally, positive economic data from the University of Michigan suggests some support for the USD, but the overall sentiment remains tilted towards a softer USD.
In the coming week, investors will closely monitor the upcoming labor market data from Australia, including Employment Change and Unemployment rate figures. Positive data could further strengthen the AUD and support the pair’s upside momentum. Moreover, any announcements of stimulus measures by the Chinese government to boost their economy would have implications for the AUD/USD pair, given the close economic ties between the two countries.
It is also worth noting that the recent appointment of Deputy Governor Bullock as the new Governor of the Reserve Bank of Australia (RBA) adds an element of uncertainty to the landscape. Traders and investors will be keen to assess the new governor’s approach to monetary policy and its potential impact on the AUD/USD pair.
In conclusion, the AUD/USD currency pair is expected to experience further upside potential as the Federal Reserve adopts a more dovish stance. Soft inflation data in the US has put pressure on the USD, benefiting the AUD/USD pair. Economic data from Australia and any announcements of stimulus measures from China will be important factors to monitor. Traders and investors should closely analyze the evolving landscape and key technical levels to inform their trading decisions.
