- AUD/USD bulls take a breather after posting the biggest daily gains in a week.
- Market sentiment remains cautiously optimistic ahead of the key US inflation data.
- Australia’s NAB Business Conditions, Business Confidence improved in January.
- US Dollar pullback ahead of US CPI joins hope of upbeat Aussie job numbers, hawkish RBA talks to favor pair buyers.
AUD/USD seesaws around 0.6970-60 as it lacks upside momentum amid cautious markets during the early hours of all-important Tuesday. While portraying the pre-data anxiety, the Aussie pair fails to cheer the upbeat prints of the National Australia Bank’s (NAB) monthly sentiment data.
Australia’s NAB Business Confidence rose to 6.0 in January, from -1.0 prior and 1.0 expected while the NAB Business Conditions rallied to 18.0 compared to 8.0 expected and 12.0 prior. It’s worth noting that Australia’s Westpac Consumer Confidence, flashed earlier in Asia, dropped to -6.9% for February versus 5.0% prior.
It’s worth noting, however, that the US Dollar’s positioning for the Consumer Price Index (CPI) for January and softer Treasury bond yields join firmer equities to put a floor under the AUD/USD prices. Alternatively, hawkish Fed talks and the market’s doubts over the Reserve Bank of Australia’s (RBA) hawkish concerns seem to cap the Aussie pair’s run-up ahead of all-important US inflation numbers.
On Monday, Fed Governor Michelle Bowman said that the Federal Reserve will need to continue to raise interest rates in order to get them to a level high enough to bring inflation back down to the central bank’s target rate, per Reuters. Before him, Philadelphia Federal Reserve President Patrick Harker pushed back the chatters of a Fed rate cut during 2023. However, the policymaker did mention, “Fed not likely to cut this year but may be able to in 2024 if inflation starts ebbing.” His comments were mostly in line with Fed Chair Jerome Powell’s cautious optimism and exerted downside pressure on the US Dollar.
At home, the RBA appeared hawkish but the quarterly statement from the Aussie statement raise doubts on the more rate lifts as it downplays inflation forecasts, which in turn challenged the AUD/USD bulls.
Elsewhere, S&P 500 Futures print mild gains while Australia’s ASX 200 rises 0.35% on a day by the press time, which in turn follows Wall Street’s gains and favors the AUD/USD bulls.
Looking ahead, AUD/USD traders should pay attention to the US CPI data as the recent Federal Reserve (Fed) comments appear light when suggesting more rate hikes. Also, the Fed policy pivot talks aren’t far from the table and hence any disappointment from the US inflation numbers won’t hesitate to propel the Aussie pair further toward the north.
Technical analysis
A clear upside break of the eight-day-old descending resistance line, now support around 0.6920, keeps AUD/USD buyers hopeful as they approach the 21-DMA hurdle surrounding the 0.7000 psychological magnet.
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The AUD/USD is seen consolidating near the 0.6960 level on Wednesday morning, maintaining its presence above the 0.6950 support line even as upbeat Australian National Australia Bank (NAB) data has surfaced. Here, markets focus is now shifting to the upcoming US inflation figures due later in the day.
The pair has returned to its positive trajectory after a brief period of pressure yesterday, when it declined to intra-day low of 0.6950 in response to overnight divergences between regional CPI figures. The Australian economy is seen as faring relatively better than the rest of the world still, as visible in the NAB data which just emerged today. According to the report, the National Australia Bank’s Business Confidence clocked up a reading of 8 in April, whereas previous month the reading was 6. This is the first time in 8 months that the reading has been in the positive territory, indicating that the local economy was able to fight off the economic damage due to COVID-19, although it still has a long way to go in recovering to pre-pandemic levels.
This was largely reflected in the short-term AUD/USD movements, with the pair managing to hold on to its gains even as risk sentiments remain feeble in the market ahead of US inflation numbers due later today. The US Labor Department’s Consumer Price Index (CPI) for April 2021, which is set to be released at 12:30 GMT, is expected to see a reading of 4.7%, up from its previous figure of 4.2%. Any positive surprise in the data could firm up demand for the greenback, putting a lid on the recent AUD/USD run-up.
The AUD/USD is hence seen as maintaining its sideways trajectory in the near-term, with investors staying put on the sidelines as they await further catalysts before making a move. That being said, positive signs coming in his regards to the Australian economy, along with signs of global economic recovery, could help the AUD/USD avoid larger declines as investors opt for positions in riskier currencies.
