Bearish view
Sell the AUD/USD pair and set a take-profit at 0.6865.
Add a stop-loss at 0.7100.
Timeline: 1-2 days.
Bullish view
Buy the AUD/USD pair and set a take-profit at 0.7100.
Add a stop-loss at 0.6865.
The AUD/USD pair rose slightly after the US published a soft consumer inflation report, which lowered the possibility that the Federal Reserve will hike interest rates soon. It rose to 0.6975, a few pips above this week’s low of 0.6915.
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US PPI Data and Kevin Warsh Testimony Ahead
The AUD/USD pair rose slightly after the US released softer-than-expected inflation data. According to the Bureau of Labor Statistics (BLS), the headline Consumer Price Index dropped by 0.4%, the biggest monthly decline since 2020.
Core inflation dropped from 0.2% in May to 0.0% in June. It moved from 2.9% to 2.6% on a YoY basis. The core figure was important because a day earlier, Christopher Waller had warned that the bank needed to consider hiking rates if the figure remained at an elevated level.
Still, market participants are expecting the Fed to hike interest rates later this year. For one, the core CPI has remained above the Federal Reserve’s target of 2.0% for over five years.
Also, there is fear that inflation will resume its uptrend now that the US and Iran have restarted their war. The two sides launched some major attacks overnight, with crude oil continuing to rise. Brent and West Texas Intermediate (WTI) have jumped by 20% from the June low.
The next key AUD/USD news will be the upcoming US producer price index (PPI) data. Economists expect the report to show that the headline PPI dropped from 6.5% in May to 6.2% in June, while the core figure rose from 4.9% to 5.2%. Based on the CPI report, chances are that the PPI numbers will be short of expectations.
The pair will also react to a statement by Kevin Warsh, who will speak in Congress for the second day.
AUD/USD Technical Analysis
The AUD/USD pair rose slightly after Tuesday’s consumer inflation report. Still, it has remained inside a narrow range in the past few days. This consolidation is part of the formation of a bearish flag pattern, a popular continuation sign.
The pair is hovering at the 38.2% Fibonacci Retracement level. It also remains below the 50-day moving average, where it has been at since June 5 this year.
Therefore, the pair will likely have a bearish breakout as investors react to the rising geopolitical tensions between the US and China. If this happens, the pair may drop to the support of 0.6865.
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