The AUD/USD has lost about 65 pips so far on Wednesday. The pair has opened the Asian session touching an intraday high at 0.7027, but has subsequently been losing ground to mark m7-day lows at 0.6964.
The Australian dollar weakened after data released by the Australian Bureau of Statistics showed that the wage price index missed market expectations by rising 0.7% during the second quarter instead of the estimated 0.8%. This weaker data dampens prospects for a 50 basis point rate hike by the Reserve Bank of Australia in September. This, coupled with weak commodity prices, puts some downward pressure on the resource-linked Aussie.
The US dollar, meanwhile, remains close to the monthly high and continues to be supported by the Fed’s expectations, which are very encouraging. Despite a softer US CPI last week, recent comments from several Fed officials suggest that the central bank will maintain its tightening policy. Aside from this, risk aversion underpins the greenback as a haven and weighs on the Australian dollar.
The Market sentiment remains fragile amid growing concerns about a global economic downturn, fueled by disappointing Chinese macroeconomic data on Tuesday. The fundamental background supports the prospects for an extension of the depreciation movement for the AUD/USD pair. That said, traders may want to refrain from making aggressive bets ahead of the FOMC meeting minutes, due later in the US session.
Markets are pricing in at least a 50 basis point interest rate hike at the September FOMC meeting. Therefore, the minutes will be looked for clues about the possibility of a 75 basis point hike. This would weigh on the dollar and determine the next leg of a directional move for the AUD/USD pair. Meanwhile, US retail sales figures could provide some momentum in the early US session.
Technical levels
Source: Fx Street
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