AUD/USD clings to modest gains near mid-0.7700s, lacks follow-through
|- Upbeat comments by RBA’s Kent allowed AUD/USD to gain some positive traction.
- A subdued USD demand remained supportive of a modest intraday positive move.
- Investors seemed reluctant to place aggressive bets ahead of Thursday’s US CPI.
The AUD/USD pair traded with a positive bias through the early European session and was last seen hovering near daily tops, around mid-0.7700s.
The pair stalled the previous day's retracement slide from the 0.7765 supply zone and attracted some dip-buying near the 0.7730 region on Wednesday. The uptick was supported by mostly upbeat comments by the RBA Assistant Governor (Financial Markets) Christopher Kent and seemed unaffected by the softer Chinese CPI report.
Speaking at the KangaNews Debt Capital Markets Online Summit, Kent said that the Australian central bank sees good prospects for growth and an eventual increase in wages and prices. Kent, however, reiterated that inflation is unlikely to be sustainably within the RBA's target range of 2-3% until 2024 at the earliest.
Meanwhile, bulls largely shrugged off mixed Chinese inflation figures, which showed that headline CPI rose 1.3% YoY in May as against 1.6% anticipated. Conversely, the Producer Price Index (PPI) jumped to the highest level since 2008 and rose 9.0% YoY during the reported month, mainly driven by the recent rise in commodity prices.
On the other hand, the US dollar witnessed a subdued/range-bound price action amid the ongoing decline in the US Treasury bond yields. This was seen as another factor that extended some support to the AUD/USD pair. That said, concerns that rising inflation pressure might force the Fed to taper acted as a tailwind for the USD.
Moreover, investors might refrain from placing any aggressive bets ahead of Thursday's release of the latest US consumer inflation figures. This will be another piece of important macro data that would set the tone for the FOMC meeting on June 15-16 and play a key role in determining the next leg of a directional move for the AUD/USD pair.
Technical levels to watch
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