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AUD/USD slips below 0.6500, but still near seven-week top, ahead of Aussie CPI

  • AUD/USD catches breath after a five-day winning streak to the seven-week top.
  • Markets remain mixed amid hopes of major economies’ re-opening, fears of US-China tussle and broad US dollar weakness.
  • Downbeat US data and mixed performance of oil also confuse the traders.
  • Aussie Q1 CPI will kick-start the key day including US GDP and FOMC.

AUD/USD extends pullback from seven-week top to 0.6490 at the start of Wednesday’s Asian session. The broad US dollar weakness and upbeat sentiment surrounding the major economies’ re-open seems to have contributed towards the pair’s run-up to the multi-day top before the late-US session on Tuesday. Though, the recent noise between the US and China, coupled with downbeat US data, likely weighed on the quote off-late.

USD weakness pleases bulls amid mixed feelings…

While the directives to re-open major European economies, coupled with increasing odds of the US economic restart, favors the market’s risk-on sentiment, the US allegation over China’s role in the coronavirus (COVID-19) outbreak weigh on the Aussie pair.

Even so, the broad US dollar weakness, mainly due to the downbeat data and cautious sentiment ahead of the key US catalysts like the first estimate of Q1 GDP and FOMC, favor the pair bulls.

Amid all these mixed feelings, the US 10-year Treasury yields dropped four basis points (bps) to 0.616% while Wall Street closed Tuesday’s trading session in red with NASDAQ bearing the burden of IT rout.

Although Wednesday becomes the crucial day for global markets mainly due to the US first quarter (Q1) GDP and monetary policy meeting by the Federal Reserve, Australia’s Q1 Consumer Price Index (CPI) will entertain the traders during Asia.

Forecasts suggest that the headline CPI strengthen from 1.8% to 2.0% YoY, in contrast to 0.2% QoQ versus 0.7% prior. Further, RBA’s Trimmed Mean CPI is expected to remain unchanged near 0.4% QoQ and 1.6% YoY respectively. “Australian Q1 CPI is out at 1:30 pm. We expect headline inflation to print at 0.1% q/q and 1.9% y/y,” said analysts at the Australia and New Zealand Banking Group (ANZ).

Considering the mixed expectations from inflation figures, the Aussie prices may witness a pullback in the case of the downbeat outcome. The reason is that the weak data will give the RBA another reason to ease monetary policy further, in addition to combat the pandemic. It should also be noted that the heavy economic docket during the day is likely to dim the importance of virus updates.       

Technical analysis

Unless slipping below the mid-month top surrounding 0.6440, AUD/USD can keep targeting 100-day SMA, near 0.6575 during the further upside. In a case where the quote drops below 0.6440, a three-week-old rising support line near 0.6350 can lure the sellers.

 

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