After a two-day slump, the AUD/USD is still being pushed towards the yearly low.
The US CPI is fueling reflation fears, but Fed Chairman Powell may stick to his guns.
Covid infections in Australia have decreased from their peak in September, and Prime Minister Scott Morrison has proposed an increase in assistance payments.
The Westpac Consumer Confidence Index, the RBNZ, and Fed Chairman Powell will all be on the calendar.
The AUD/USD bears maintain control for the third day in a row, with the quotation hovering around 0.7445 in the early hours of Wednesday morning in Asia. The Australian dollar fell to its lowest level in four days the day before, as the US dollar index (DXY) climbed to its highest level in a month.
Markets have plenty of reasons to put safe-haven bids beneath the US dollar, whether it’s the revival of the coronavirus (COVID-19) troubles in the West or fears of reflation. The outcome was last week’s surge in the greenback gauge to a three-month high.
Since April, the United Kingdom has recorded the largest number of covid-related deaths, while total infections in Australia have decreased from 120, the most in ten months, to 100. Despite this, the mortality toll in New South Wales (NSW) and Queensland continues to worry policymakers, who are rushing to inject more jabs into the Australian nation. The US government is also debating the need for a third covid vaccination dose.
Fears of a covid revival are growing as variations gain the ability to spread quicker and develop resistance to vaccines. The same could have an impact on the pandemic’s most recent economic change, bolstering the rush to risk-avoidance.
The US Consumer Price Index (CPI) climbed over 4.9 percent predicted to 5.4 percent YoY, while the core figure was also revised upwards from 3.8 percent to 4.5 percent, pleasing the USD bulls. Nonetheless, Fed Chairman Jerome Powell’s testimony before the House Financial Services Committee on the Semi-Annual Monetary Policy Report may maintain the “transitory” view for price pressures, as details of the data reinforce what the Fed Chief has been saying.
To combat the covid-related losses, Australian Prime Minister Scott Morrison announced an increase in emergency catastrophe compensation to people and jointly funded payments to businesses, subject to specific conditions.
It’s worth noting that China’s trade data aided the AUD/USD pair in testing the 0.7500 mark earlier in Asia on Tuesday, but the National Australia Bank’s (NAB) numbers disappointed the bulls.
In the midst of these maneuvers, US stocks retreated from the previous day’s record highs, while US 10-year Treasury yields climbed 5.5 basis points (bps) to 1.418 percent by the close of Tuesday’s trade.
COVID-19 updates and comments from Fed policymakers will be essential to watch in the coming months, while July’s Westpac Consumer Confidence for Australia, previously -5.2 percent, could provide immediate guidance.
AUD/USD is poised to retest the yearly bottom near 0.7410 unless it crosses the 200-DMA, around 0.7585, on a daily closing basis. A short-term falling trend line from June 18, close to 0.7395, will, however, thwart any additional drop./n
