AUD/USD: Mildly bid around 0.6960 amid USD weakness, trade woes

  • Renewed concerns over Fed’s easing saw the greenback declining against majority counterparts including AUD/USD.
  • The US and China continue to have their own trade-related differences, farm imports, arms sales to Taiwan became the first ones grabbing the spotlight.
  • Speech from RBA’s Debelle and Aussie Home Loans data will be followed for fresh impulse.

Like all other major currency pairs, the AUD/USD also surged on the back of Fed Chair Powell’s testimony and FOMC minutes ignoring previous downbeat sentiment mainly due to the US-China trade negotiations. During initial Thursday, the Aussie pair trades near 0.6960 ahead of the second-tier data from home and a speech from RBA’s Assistant Governor (Risk Management Committee) Guy Debelle.

With the Federal Reserve Chairman’s first-day of Testimony showing his downside bias towards the inflation, not to forget a signal that “most” at the FOMC expect higher rate cuts, the US Dollar (USD) plummeted across the board. Adding to the weakness was the Federal Open Market Committee (FOMC) meeting minutes that reiterated policymakers’ support for monetary easing.

Following that, markets turned against the greenback and the Aussie wasn’t an exception. Even the uncertainty surrounding the US-China trade deal couldn’t hold the buyers. Diplomats of the world’s two largest economies are talking the much-awaited trade deal but witnessing blocks at the start. Chinese dailies spread the news that there was no discussion on importing higher farm products from the US during G20 while the US arms sales to Vietnam was also criticized.

Moving on, the speech from the RBA’s Debelle will be followed for clears related to how many more rate cuts are expected from the Reserve Bank of Australia (RBA) considering recent global pessimism.

At the data front, Consumer Inflation Expectations (July), May month Investment Lending For Homes and Home Loans data will be on the spotlight. Any further deterioration into the consumer inflation from 3.3% earlier, coupled with additional weakness in investment from -2.2% prior, will confront expected recovery in Home Loans to -0.6% from -1.2%. Additionally, China’s New Loans for July are also up for release and might rise to 1,700 billion from 1,180 billion previous readouts.

US inflation and second-day of the Fed Chair Jerome Powell’s testimony will be the key to watch following aforementioned details.

Technical Analysis

With the 50-day exponential moving average (EMA) continues to restrict the pair’s near-term upside at 0.6975, chances of its decline to 0.6910 and then towards 0.6880 can’t be denied. However, a successful break of 0.6975 can quickly propel prices to 0.7015 and current month high near 0.7050.

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