Bearish View
Sell the AUD/USD and add a take-profit at 0.7400.
Add a stop-loss at 0.7525.
Timeline: 1-2 days.
Bullish View
Set a buy-stop at 0.7490 and a take-profit at 0.7550.
Add a stop-loss at 0.7430.
The AUD/USD pair erased some of the losses made on Tuesday after the strong US consumer inflation data. The pair rose to 0.7470, which was substantially higher than Tuesday’s low of 0.7410.
Australia Stimulus
The Australian government announced a new stimulus package to support businesses in New South Wales (NSW) as the state battles a new wave of coronavirus.
The package will reintroduce the JobKeeper program for the state. The government will pay $352 every week for workers who have lost more than 20 hours a week. The amount will increase to $600 in the fourth week of the lockdown. Further, the government will extend capital to companies that have lost business during the lockdown.
The government announced the stimulus after the number of coronavirus cases in NSW rose pushing the state to order a lockdown. It also barred Victoria residents from travelling to the state. NSW residents who travel from Victoria will need to go through 14 days of quarantine.
The AUD/USD also reacted to the Reserve Bank of New Zealand (RBNZ) decision. The bank decided to leave interest rates unchanged. At the same time, it decided to end the large asset purchase program (LSAP) since the economy is recovering at a relatively fast pace. Therefore, analysts expect that the RBA will likely follow into these footsteps.
Meanwhile, the pair declined on Tuesday after the US published strong consumer inflation data. The headline CPI rose by 0.9% in June leading to an annualised increase of 5.4%. Core CPI that excludes the volatile food and energy prices, rose by 4.5%, which was the highest level in decades. As such, analysts expect that the Producer Price Index (PPI) data scheduled for today will likely be better than the 6.8% estimate. The pair will also react to the Fed’s Beige Book.
AUD/USD Technical Analysis
The AUD/USD pair declined to 0.7427 on Tuesday after the strong US inflation data. The pair then recovered in the overnight session and is trading at 0.7465. It has formed a head and shoulders pattern on the four-hour chart. It also remains below the 50-day and 25-day exponential moving averages (EMA). The pair has also declined below the important resistance level at 0.7500. Therefore, there is a possibility that it will resume the downward trend aead of the US PPI data, Beige Book, and Jerome Powell testimony.
