Home Forex AUD/USD firm around 0.7020 with Australian CPI ahead

AUD/USD firm around 0.7020 with Australian CPI ahead

by SuperiorInvest
  • A higher than expected Consumer Price Index (CPI) in Australia could offer a chance to break above 0.7100.
  • The US calendar will see S&P global PMI on Tuesday and GDP on Wednesday.
  • AUD/USD: Failure to gain a move above 0.7050 will expose the pair to sellers; otherwise a test of 0.7100 is on the cards.

Australian dollar (AUD) surges against US dollar (USD) even as greenback anticipates minimal gains, supported willingness to take risks improvement. Wednesday’s Australian inflation report could also prompt a response from the Reserve Bank of Australia (RBA). At the time of writing, AUD/USD is trading at 0.7025.

AUD/USD is holding steady above 0.7000 despite the US dollar offering

AUD/USD boosted our gains, albeit slightly limited by the dollar. US dollar index (DXY), a measure of the dollar’s value against six benchmark exchanges, is gaining 0.13% to 102.124, supported by rising U.S. Treasury yields. The benchmark 10-year bond rate rose three and a half basis points to 3.521%.

After Wall Street opened, the Conference Board (CB) reported its main economic index (LEI), which fell for a tenth month in December. The US LEI fell sharply again in December, which continues to signal a recession for the US economy in the near future,” he said Ataman Ozyildirim, Chief Economics Officer, at The Conference Board. “There was widespread weakness among the leaders indicators in December, indicating worsening conditions in labor, manufacturing, housing and financial markets in the coming months.

Meanwhile, money market futures expect the Federal Reserve (Fed) to raise rates by 25 basis points at its February 1 meeting, leaving the Federal Funds Rate (FFR) at 4.50-4.75%.

Elsewhere, the Reserve Bank of Australia (RBA) is expected to hike. rates by 25 bps, the cash rate on February 7 to 3.35%. The markets had a price with 80% probability RBA rate hikes and the cash rate peaks at 3.55 to 3.60%.

Meanwhile, Wednesday’s release of Australia’s consumer price index (CPI) for the fourth quarter is expected to rise 1.5% quarter-on-quarter and 7.4% year-on-year. According to Westpac analysts, this should be the peak of the cycle for inflation. A softer reading would send AUD/USD below 0.7000; otherwise, it could open the door for further upside and test the 0.7100 mark.

On the American front, his calendar will include global S&P PMI, ahead of Wednesday’s fourth-quarter and full-year 2022 gross domestic product (GDP).

AUD/USD Technical Analysis

Although AUD/USD extended its gains above 0.7000, the YTD high of 0.7063 remains intact, with sellers moving around 0.7050 and reducing prices. Failure to gain grip above 0.7063 prevented AUD/USD from testing the August 11 swing high of 0.7136 and the pair slipped below 0.7000. A break below the latter would reveal the 20-day exponential moving average (EMA) at 0.6889.

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