AUD/USD falls from 0.7000 ahead of US CPI

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  • The Australian dollar remains lower and traded within a tight range.
  • Investors are bracing for the US consumer price index for July.
  • Better-than-expected Australian business confidence data limited downward pressures.

The AUD/USD pulls back from weekly highs but trades in choppy trading range as investors brace for US inflation report. This coupled with geopolitical wrangling between China and Taiwan following House Speaker’s visit of Representatives, Pelosi, and expectations of further Fed tightening weighed on sentiment.

At the time of writing, the AUD/USD is trading at 0.6965, below its opening price, after hitting a daily high of 0.6994. However, the failure of the buyers to break through the 0.7000 level exposed the major to selling pressure.

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AUD/USD falls on risk aversion

EU and US stocks post losses. Last Friday’s strong US employment report fueled expectations of a 75 basis point Federal Reserve interest rate hike, which could come if confirmed by inflation data. Headline inflation estimates stand at 8.7% year-on-year, down from 9% in June. The so-called core CPI, which excludes volatile items such as food and energy, is forecast at 6.1% year-on-year, down one point from June’s 6.2%.

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However, the dollar has failed to take advantage of risk aversion. The dollar index, which measures the value of the dollar against a basket of currencies, stands at 106.189, down 0.18%. By contrast, US bond yields are rising ahead of the US inflation report.

The Australian dollar remains buoyed by a better-than-expected Chinese export report. This, coupled with rising iron ore prices, prevented AUD/USD from suffering further losses. Meanwhile, NAB Australian Business Confidence rebounded in July, buoyed by sales and earnings. However, companies reported increased purchasing and labor costs.

Geopolitics could hurt AUD/USD. As China’s military drills have dragged on beyond their scheduled date and into international waters, the risks surrounding Taiwan are keeping investors uneasy. Further rally could be positive for the US dollar and negative for the Australian dollar.

What to watch out for

Data on private housing approvals and building permits will be released on the Australian economic calendar. In the US, the inflation readings, along with the Fed’s continued speech after the US CPI, will shed some light on the Fed’s next move.

AUD/USD Key Technical Levels

AUD/USD

Panorama
Last Price Today 0.6954
Today’s Daily Change -0.0032
Today’s Daily Change % -0.46
Today’s Daily Opening 0.6986
Trends
20 Daily SMA 0.6906
50 Daily SMA 0.6951
100 Daily SMA 0.7101
200 Daily SMA 0.7159
levels
Previous Daily High 0.701
Previous Daily Minimum 0.6898
Previous Maximum Weekly 0.7048
Previous Weekly Minimum 0.6869
Monthly Prior Maximum 0.7033
Previous Monthly Minimum 0.668
Daily Fibonacci 38.2% 0.6967
Daily Fibonacci 61.8% 0.694
Daily Pivot Point S1 0.6919
Daily Pivot Point S2 0.6852
Daily Pivot Point S3 0.6806
Daily Pivot Point R1 0.7031
Daily Pivot Point R2 0.7077
Daily Pivot Point R3 0.7144

Source: Fx Street

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