- The Australian dollar remains heavy and exchanges hands amidst a narrow range.
- Investors brace for the US Consumer Price Index for July.
- Better-than-expected Australian business confidence data capped further downside pressures.
The AUD/USD retraces from weekly highs, but trades in a choppy trading range as traders prepare for the US inflation report. That, alongside geopolitical tussles between China-Taiwan, after the visit of US House Speaker Pelosi and expectations of further Fed tightening, weighed on the mood.
At the time of writing, the AUD/USD is trading at 0.6965, below its opening price, after hitting a daily high at 0.6994. Nevertheless, buyers’ failure to pierce the 0.7000 figure exposed the major to selling pressure.
AUD/USD slides on risk-aversion
EU and US equities are registering losses. Last Friday’s solid US job report fueled expectations of a 75 bps Federal Reserve rate hike, which could happen if confirmed by inflation data. Estimations of headline inflation are at 8.7% YoY vs. 9% in June. The so-called core CPI, which excludes volatile items like food and energy, is foreseen at 6.1% YoY, a tick lower than June’s 6.2%.
Nevertheless, the greenback has been unable to capitalize on risk aversion. The US Dollar Index, a gauge of the buck’s value vs. a basket of rivals, sits at 106.189, down 0.18%. Contrarily, US bond yields are rising ahead of the US inflation report.
The Australian dollar remains bolstered by a better-than-expected China exports report. That, alongside Iron ore prices pushing to the upside, capped the AUD/USD from further losses. Meanwhile, the Australian NAB Business Confidence rebounded in July, bolstered by sales and profits. However, businesses reported rising costs in purchases and labor.
Geopolitics-wise could be harmful to the AUD/USD. With China’s military drills extending beyond their due date and breaching international waters, risks surrounding Taiwan keep investors uneasy. Further escalation might be positive for the US dollar and negative for the Australian dollar.
What to watch
The Australian economic calendar will feature Private House Approvals and Building Permits. On the US front, inflation readings, alongside further Fed-speaking after US CPI, will shed some light on the Fed’s next move.
AUD/USD Key Technical Levels
Information on these pages contains forward-looking statements that involve risks and uncertainties. Markets and instruments profiled on this page are for informational purposes only and should not in any way come across as a recommendation to buy or sell in these assets. You should do your own thorough research before making any investment decisions. FXStreet does not in any way guarantee that this information is free from mistakes, errors, or material misstatements. It also does not guarantee that this information is of a timely nature. Investing in Open Markets involves a great deal of risk, including the loss of all or a portion of your investment, as well as emotional distress. All risks, losses and costs associated with investing, including total loss of principal, are your responsibility. The views and opinions expressed in this article are those of the authors and do not necessarily reflect the official policy or position of FXStreet nor its advertisers. The author will not be held responsible for information that is found at the end of links posted on this page.
If not otherwise explicitly mentioned in the body of the article, at the time of writing, the author has no position in any stock mentioned in this article and no business relationship with any company mentioned. The author has not received compensation for writing this article, other than from FXStreet.
FXStreet and the author do not provide personalized recommendations. The author makes no representations as to the accuracy, completeness, or suitability of this information. FXStreet and the author will not be liable for any errors, omissions or any losses, injuries or damages arising from this information and its display or use. Errors and omissions excepted.
The author and FXStreet are not registered investment advisors and nothing in this article is intended to be investment advice.
Recommended content
Editors’ Picks
EUR/USD recovers to 1.1150 ahead of US PCE inflation data
EUR/USD is recovering losses to trade near 1.1150 in European trading on Friday. The pair trims softer French and Spanish inflation data-led losses amid a cautiously optimistic market mood and a wobbly US Dollar, as US PCE inflation report looms.
GBP/USD keeps losses below 1.3400, awaits US PCE data
GBP/USD is off the lows but stays pressured below 1.3400 in the European session on Friday. A modest US Dollar uptick and a mixed market sentiment remain a drag on the pair. The focus now shifts to the high-impact US PCE inflation data for fresh impetus.
Gold price pulls back from record high ahead of US PCE Price Index, bullish bias remains
Gold price attracts some sellers on the last day of the week and retreats further from the all-time peak, around the $2,685-2,686 region touched on Thursday. The downtick is sponsored by the emergence of some US Dollar buying, which tends to undermine demand for the commodity.
US core PCE set to show continued disinflation trend, reinforcing Federal Reserve easing cycle
The core Personal Consumption Expenditures Price Index is seen rising 0.2% MoM and 2.7% YoY in August. Markets have already priced in near 50 bps of easing in the next two Federal Reserve meetings. A firm PCE result is unlikely to move the Fed’s stance on policy.
RBA widely expected to keep key interest rate unchanged amid persisting price pressures
The Reserve Bank of Australia is likely to continue bucking the trend adopted by major central banks of the dovish policy pivot, opting to maintain the policy for the seventh consecutive meeting on Tuesday.
Five best Forex brokers in 2024
VERIFIED Choosing the best Forex broker in 2024 requires careful consideration of certain essential factors. With the wide array of options available, it is crucial to find a broker that aligns with your trading style, experience level, and financial goals.