AUD/USD edges lower toward 0.74, turns negative on the day

  • AUD/USD reverses course after touching a fresh monthly high in the Asian session.
  • The US Dollar Index stays in the positive territory near 95.20.
  • PPI figures from the U.S. fall short of market expectations.

The AUD/USD pair, which touched its highest level since July 26 at 0.7452, extended its losses in the early NA session and was last seen trading at 0.7412, where it was down 0.2% on the day.

Earlier today, the data from China showed that the annual core-CPI rose to 2.1% in July from 1.9% in June and beat the market expectation of 1.9%. Reacting to the data, the USD/CNY pair fell sharply on the CNY strength and helped the China-sensitive currencies such as the AUD and the NZD gain traction. However, the AUD/USD pair failed to preserve its bullish momentum during the European trading hours and started to retrace its gains.

In the second half of the day, despite the disappointing PPI figures from the United States, the US Dollar Index stayed in the positive territory to drag the pair back into the negative territory. After dropping to 95.15 with the core-PPI data easing to 2.7% on a yearly basis in July, the DXY easily advanced above the 95.20 mark.

During the early trading hours of the Asian session on Friday, the RBA is going to publish its monetary policy statement. Earlier this week, the RBA announced its decision to keep the policy rate. "In terms of the detail of its press release and new thoughts, we see more softer than stronger observations, notably around China, housing, the drought and near-term headline CPI inflation," Nomura analysts commented.

Technical outlook

On the downside, 0.7400 (psychological level/20-DMA/50-DMA) stays as a critical support ahead of 0.7350 (Aug. 3 low) and 0.7315 (Jul. 20 low). Resistances, meanwhile, could be seen at 0.7450 (daily high), 0.7490/0.7500 (100-DMA/psychological level) and 0.7575 (Jun. 14 high).

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