AUD/USD Forecast: Seems poised to appreciate further, looks to US data for fresh impetus

The AUD/USD pair attracts fresh buying near the 0.6565 area on Thursday and stalls the previous day's modest pullback from a three-week high touched following the release of the US consumer inflation figures. The Australian Dollar (AUD) gets a minor lift after the official data showed that the economy added 58,000 new jobs in July, more than the 20.0K expected. This comes on top of the 50,000 jobs gained in June and overshadows an uptick in the Unemployment Rate to 4.2%, led by an increase in the participation rate to 67.1% from 66.9% in June.  Nevertheless, the data confirms that the labor market remains tight and is cooling more gradually than expected, which should allow the Reserve Bank of Australia (RBA) to stick to its hawkish stance.

In fact, RBA Governor Michele Bullock said last week that the central bank will not hesitate to hike rates in the face of more upside risks to inflation. Apart from this, a generally positive risk tone, along with subdued US Dollar (USD) price action, turns out to be another factor that contributes to the AUD/USD pair's goodish intraday positive move of around 60 pips. The closely watched US Consumer Price Index (CPI) report indicated that inflation is on a downward trend and reaffirmed bets for an imminent start of the Federal Reserve's (Fed) rate-cutting cycle in September. The headline US CPI slowed a bit in July and fell below the 3% YoY rate for the first time in nearly three-and-half years, suggesting progress towards the Fed's inflation goals.

On a monthly basis, US consumer prices rose moderately, by 0.2% in July after falling 0.1% in the previous month. This forced investors to scale back their expectations for a more aggressive policy easing by the Fed, which helps limit the downside for the USD. Furthermore, the mixed Chinese macro data released earlier this Thursday does little to ease worries about a downturn in the world's second-largest economy and might contribute to capping gains for the AUD/USD pair. The National Bureau of Statistics reported China’s Retail Sales grew by 2.7% in July from a year ago as against the 2.6% anticipated, while Industrial production rose by 5.1% in the same period, down from the 5.3% booked previously and missing market expectations for a reading of 5.2%. 

Nevertheless, the aforementioned fundamental backdrop suggests that the path of least resistance for the AUD/USD pair is to the upside and supports prospects for a further near-term appreciating move. Market participants now look forward to the US economic docket – featuring the release of monthly Retail Sales figures, the usual Weekly Initial Jobless Claims, the Empire State Manufacturing Index and the Philly Fed Manufacturing Index. This, along with speeches by influential FOMC members and the broader risk sentiment, will drive the USD demand and allow traders to grab short-term opportunities around the major. 

Technical Outlook

From a technical perspective, this week's breakout through the very important 200-day SMA and the emergence of fresh buying on Thursday favors bullish traders. Moreover, oscillators on the daily chart have just started moving in positive territory and support prospects for a further near-term appreciating move. The AUD/USD pair seems poised to surpass a multi-week top, around the 0.6640-0.6645 area touched on Wednesday, and climb further to the 0.6675-0.6680 region en route to the 0.6700 mark. A sustained strength beyond the latter should allow spot prices to make a fresh attempt to reclaim the 0.6800 mark for the first time since January. 

On the flip side, weakness back below the 0.6600 mark might continue to find decent support near the 0.6565 area, or the weekly low. This is followed by support near the 0.6520 region and the 0.6500 psychological mark. Some follow-through selling will suggest that the latest recovery move from the YTD low has run its course and prompt some technical selling. The subsequent decline has the potential to drag the AUD/USD pair to the 0.6435 intermediate support en route to the 0.6400 mark and last week's swing low, around mid-0.6300s.