- AUD/USD bounces back from three-week low and tests 100-day SMA
- Chinese trade data and USD strength have minimal impact on recovery
- Investors cautious as they await US inflation data later this week
The AUD/USD pair shows resilience as it holds above the 100-day Simple Moving Average (SMA) near the 0.6645 level and makes a modest recovery from recent lows. Chinese trade data, which indicated a widening surplus and growth in exports, contributed to the bounce. However, concerns about weak domestic demand and a slightly stronger US Dollar may limit significant upward movement for the currency pair.
Following mixed US employment data, investors have adjusted their expectations for Federal Reserve policy actions. The chance of a 25-basis-point rate cut is at 71%, while a 50-bp cut is at 29%. This has pushed the USD Index higher, posing a challenge for the AUD/USD pair. Traders are now waiting for US inflation figures to gauge the Fed’s future moves before making significant trading decisions.
The upcoming US Consumer Price Index (CPI) report and Producer Price Index (PPI) release will provide crucial insights into the Fed’s rate-cutting trajectory. Depending on the inflation data, we may see either a stronger USD or increased selling pressure. With the RBA maintaining a hawkish stance, it is suggested that the recent corrective decline in the AUD/USD pair has reached its bottom.
Technical Analysis
On a technical note, the 100-day SMA aligns with the 38.2% Fibonacci retracement level, serving as a key support level. Oscillators on the daily chart are showing negative momentum, indicating a potential downward move. If the pair breaks below the support, we could see a further decline towards the 0.6600 level. Conversely, a break above the 0.6700 mark could trigger bullish momentum, leading the pair towards the YTD peak around 0.6825.
AUD/USD Daily Chart
Analysis and Conclusion
The AUD/USD pair is facing key challenges as it navigates through mixed economic data and shifting market expectations. Traders are cautious ahead of US inflation figures, which could determine the future path of the Federal Reserve’s policy decisions. Technical indicators suggest a potential downside if the pair breaks below key support levels, while a bullish breakout could lead to further gains. Overall, it is essential for investors to stay informed and monitor developments in both the US and Australian economies to make well-informed trading decisions.