The AUD/USD pair is experiencing a slight upward trend, trading 0.35% higher at 0.6945 during the European trading session on Tuesday. This movement is primarily attributed to the underperformance of the US Dollar (USD) against its peers, particularly the New Zealand Dollar, ahead of the highly anticipated US Consumer Price Index (CPI) data for June. The market's focus on inflation data is further emphasized by recent comments from Federal Reserve (Fed) officials, who have expressed greater concern about high inflation than the job market's subdued conditions. The latest estimates suggest that US headline CPI growth cooled to 3.8% Year-on-Year (YoY) in June, down from 4.2% in May, with core figures rising steadily by 2.9%. On a monthly basis, headline inflation is expected to decline by 0.1%, while core figures are projected to remain steady at 0.2%.
The Australian Dollar (AUD) has also received a boost from upbeat China's Trade Balance data, which showed a wider trade surplus of USD125.62 billion, surpassing estimates and the previous reading. This positive economic indicator has contributed to the AUD's strength, as the Chinese economy's influence on the global market cannot be overstated. However, the AUD/USD pair's near-term outlook remains bearish, as it continues to trade below the 20-day Exponential Moving Average (EMA) at 0.6957. This suggests persistent overhead supply, with the Relative Strength Index (14) around 44 indicating mild negative momentum without reaching oversold territory. The immediate resistance level is at the 20-day EMA, and a daily close above this barrier is necessary to alleviate the current downside bias.
Looking ahead, the AUD/USD pair could extend its recovery towards the June 23 high at 0.7006 if it breaks above the EMA. Conversely, if it drops below the March low of 0.6904, it could slide towards the January 7 high of 0.6766. The market's sensitivity to inflation data and the Chinese economy's impact on the Forex market make this a critical period for AUD/USD traders. The Trade Balance released by the General Administration of Customs of the People's Republic of China is a significant event that generates volatility for the Chinese Yuan (CNY), and its positive or negative readings can have a substantial impact on the Forex market.
