A Pause on AUD/USD Downtrend In Light of Australia CPI; Fed and Trade Talks Eyed


After the local inflation data crossed the wires and rendered better outlook, the Australian Dollar went up to compete against major counterparts, overshadowing mixed Chinese PMI data.

The second quarter saw that the Australian CPI clocked in 1.6 y/y against the anticipated 1.5%, up from the 1.3% in the previous quarter.

Also coming in as a surprise is the Reserve Bank of Australia's trimmed mean gauge. The CPI measure actually printed 1.6% y/y versus 1.5% which was only anticipated and unchanged from the first quarter.

Signaling weakening expectations of yet another RBA rate cut in the near-term, the Australian front-end government bond yields rallied.

The Australian Dollar eyes the return of the trade talks between the United States and China in Shanghai alongside the Federal Reserve monetary policy announcement. However, the US President Donald Trump's statement of doubt over the truce with the Chinese president Xi Jinping at the G20 Summit threw the markets off. This, according to some analysts might compromise what had already been developed through previous negotiations.

It is worth noting, that the forecast for the AUD/USD is also reliant on how dovish the Federal Reserve appears. It is anticipated that there would be a 2 to 3 cuts by the year's close and that the Central Bank's trajectory may impact, where the local conditions within the medium term would be taken by the RBA.

According to the CPI report, the AUD/USD is on the verge of momentarily stopping its 8-day consecutive losing record. This also lies in the outer limits of a critical support range that stretches from 0.6865 and 0.6827. This places near-term resistance at 0.6911.

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