Arguably the most important data for this week will be released later on today: US Consumer Price Index. Both headline and core CPI are expected to have risen 0.2% month-over-month in July. On a year-over-year basis, CPI is seen rising to 1.8% from 1.6% in June, while core CPI is expected to have remained unchanged at 1.7% last month. If the Producer Price Index (PPI) measure of inflation is anything to go by then CPI may also miss expectations. If so, the US dollar could resume its downtrend, which could underpin buck-denominated precious metals further in these times of heightened geopolitical uncertainty.
Meanwhile with stock markets tumbling on Thursday, risk sensitive Australian dollar has been largely out of favour as investors sought safety in the perceived safe haven Japanese yen and Swiss franc. But the AUD/USD has now arrived at a major support level. So any dollar weakness or improvement in risk appetite could see this pair bounce back. The Aussie will remain in focus next week, too, as we will have key data from China in the form of industrial production on Monday, followed by Australian employment figures on Thursday. So, the AUD/USD could be in for a wild ride, but in which general direction?
AUD/USD arrives at key support
Given the breakout last month from its long-term range, one would have to remain bullish on the AUD/USD until proven wrong. When will the bulls be proven wrong? If and when the last swing low at 0.7570 breaks down. Admittedly, that level is miles away from where we are at the moment. But even in the short-term, the bulls will start sweating if some breakout levels first at 0.7335/40 area and then at 0.7700/10 start to break down. BUT if the trend is still bullish in the short-term then these breakout levels should turn into support. So, there is a potential we could see the low of the week and month form at 0.7835/40, a level which was already tested overnight. It may get re-tested once US inflation data comes out. But as long as we hold above 0.7335/40 are on a daily closing basis then the short-term trend would remain bullish. The long-term trend will remain bullish while price holds above 0.7570, in my view.
Disclaimer: The information and opinions in this report are for general information use only and are not intended as an offer or solicitation with respect to the purchase or sale of any currency or CFD contract. All opinions and information contained in this report are subject to change without notice. This report has been prepared without regard to the specific investment objectives, financial situation and needs of any particular recipient. Any references to historical price movements or levels is informational based on our analysis and we do not represent or warrant that any such movements or levels are likely to reoccur in the future. While the information contained herein was obtained from sources believed to be reliable, the author does not guarantee its accuracy or completeness, nor does the author assume any liability for any direct, indirect or consequential loss that may result from the reliance by any person upon any such information or opinions.