AUD/USD drops towards 0.6430 resistance-turned-support on downbeat Australia inflation, US macros eyed

AUD/USD slides nearly 25 pips to 0.6450 on the downbeat Australia inflation and housing numbers early Wednesday. Adding strength to the pullback moves could be the fresh challenges about the US-China ties and the market’s consolidation of the previous day’s moves against the US Dollar, especially when the top-tier employment, growth and inflation clues are on the calendar.

That said, Australia’s Monthly Consumer Price Index (CPI) flashed the 4.9% YoY figures for July versus 5.2% expected and 5.4% prior while the Building Permits slumps with -8.1% figure for the said month compared to -0.8% market forecasts and -7.7% figures reported in June.

With this, the Aussie statistics challenge the previous day’s hawkish comments from the Reserve Bank of Australia (RBA) Governor-Designate Michelle Bullock. The policymaker conveyed too high inflation as the priority as Governor before flagging hopes of raising rates on Tuesday. However, RBA’s Bullock also showed readings to watch data carefully for further decision-making.

Elsewhere, concerns about China and fears of no easy money from the International Monetary Fund (IMF) also seemed to have prodded the AUD/USD bulls. Recently, China’s embassy in the US defended its cybersecurity review on the US chipmaker Micron by citing national security concerns, especially after US Commerce Secretary Gina Raimondo complained about the hardships for the US firms in China.

Earlier in the day, the IMF showed readiness to be more cautious while allocating the Special Drawing Rights (SDRs) in the future, due to the current environment of higher interest rates and inflation.

Against this backdrop, S&P 500 Futures struggle to extend the three-day uptrend while the US Dollar Index (DXY) remains sidelined around 103.55 after falling the most in six weeks. That said, the US Treasury bond yields remain sidelined at a two-week low.

It should be noted that the downbeat prints of consumer sentiment and employment signals from the US drowned the US Dollar and the yields the previous day and fueled the AUD/USD price towards refreshing the weekly top.

Looking ahead, US ADP Employment Change, the final readings of the US second quarter (Q2) Gross Domestic Product (GDP) and the Personal Consumption Expenditure (PCE) are the key to watch for clear directions.

Technical analysis

Failure to cross the 21-DMA hurdle surrounding 0.6480 directs the AUD/USD pair towards the six-week-old previous resistance line surrounding 0.6430.