The Australian dollar is drifting on Wednesday. AUD/USD is trading at 0.6637 in the North American session, down 0.15% on the day. There are no US events and only one US release on the calendar, which should translate into a quiet day for the Australian dollar.
Australia releases consumer and business confidence data early on Tuesday and the markets are braced for soft numbers. The Westpac Consumer Sentiment index jumped 1.7% in June after a nasty streak of three straight declines but the forecast for July stands at -0.3%. The NAB Business Confidence index eased to -3, the first decline in five months. The downtrend is expected to continue in June, with a forecast of -5.
The RBA meets next on August 6 and the second-quarter CPI report, which will be released a week earlier, will play a key role in the decision. The RBA said in the past two policy meetings that it discussed rate hikes before deciding to hold rates at the cash rate of 4.10%. The markets have priced in a 32% chance of a quarter-point rate hike at the August meeting, compared to just 12% two weeks ago, according to the ASX rate tracker.
China’s inflation has been very low as the country continues to grapple with an economic slowdown and the risk of deflation is significant. China releases June CPI on Wednesday. The market estimate stands at 0.4% y/y after two straight gains of 0.3%. Monthly, inflation is expected to remain at -0.1%. China is importing less and that is a serious concern for Australia, as the Asian giant is Australia’s number one trading partner.
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AUD/USD Technical
- There is resistance at 0.6791 and 0.6832
- 0.6712 and 0.6671 and the next support levels
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