- AUD/USD takes the bids after upbeat Q1 CPI figures.
- The pre-FOMC, GDP dull trading prevails amid risk reset.
- Optimism surrounding economic restart jostles with likely US-China tussle.
AUD/USD takes the bids to 0.6520, the seven-week high, after Australia’s Q2 2020 inflation figures pleased Aussie buyers during the early Wednesday. Also contributing to the pair’s strength could be the broad US dollar weakness and risk-reset.
Data concerning Australia’s first quarter (Q1) 2020 inflation figures suggest the headline Consumer Price Index (CPI) tops 2.0% forecasts with 2.2% mark on YoY while QoQ figures also cross 0.2% estimation with 0.3%. Further, the RBA’s Trimmed Mean CPI also rose above 1.6% and 0.4% forecasts to 1.8% and 0.5% YoY and QoQ respectively.
Read: Australia Q1 RBA trimmed mean CPI +0.5 pct QoQ vs poll +0.4 pct
Market’s risk tone witnesses a pullback after the previous day’s risk-ff sentiment. While portraying the same, US 10-year Treasury yields stay mildly positive around 0.62% with the S&P 500 Futures gaining over 0.70% to 2,888. Even so, stocks in Asia-Pacific flash mixed signals with small losses in Japan and New Zealand confronting minor gains in Australia and South Korea.
While increased optimism surrounding the economic re-start seems to pave the way for the market’s risk-on sentiment, fears of the US-China tussle amid Australia’s recently tensed relations with the dragon nation weigh on the risk-tone. Also exerting downside pressure on the market’s risk catalysts could be the caution ahead of the key US data/events.
The preliminary readings of the US Q1 GDP and monetary policy meeting by the Federal Reserve will outshine the heavy economic docket during the day. Forecasts suggest that the GDP will spread disappointment with -4.0% figures versus +2.1% prior while the FOMC won’t alter the present monetary policy. Though, a dovish tone of Chairman Jerome Powell is widely anticipated.
Apart from the data, virus updates and headlines suggesting further tension between the US and China could keep the traders busy during the key day.
Technical analysis
Not only a five-week-old rising trend line, currently near 0.6360, but a confluence of 21-day and 50-day SMAs around 0.6300 also restricts the AUD/USD pair’s near-term downside. Meanwhile, the pair’s sustained run-up beyond the mid-month top surrounding 0.6445/40 enables it to challenge a 100-day SMA level of 0.6570.
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