Key points:
The Australian dollar took a breather on Tuesday, holding steady at $0.6773 after retreating from its 2024 high of $0.6798. This pause comes as traders await the release of July’s domestic inflation data, which is expected to have a notable impact on the currency’s direction.
The uncertainty surrounding this data has created a cautious atmosphere in the market, leading to a halt in the Aussie’s recent rally.
See: Aussie plunges as seen on the VT Markets app.
We visit the charts for more insight. The Australian dollar recently experienced a decline, closing at 0.67775 after a 0.4% overnight drop. This dip is closely tied to the U.S. dollar’s rebound from its eight-month lows, as traders adjusted their positions ahead of key global events.
The market is keenly focused on Nvidia’s earnings report set for Wednesday and U.S. inflation data due on Friday, both of which have the potential to significantly impact currency movements.
Back to the chart, we see that it illustrates the AUD/USD pair’s struggle to maintain its earlier gains, with the price briefly touching 0.67985 before pulling back. The Moving Averages (5, 10, 30) on the chart are beginning to flatten, reflecting the market’s cautious stance as traders await more definitive direction.
The MACD indicator shows waning bullish momentum, with the MACD line approaching the signal line and the histogram beginning to shrink, signaling potential further weakness.
Traders will be watching the 0.67500 level for support, while any upward movement could face resistance near the recent high of 0.67985. The market’s reaction to Nvidia’s earnings and this week’s inflation data will be key to determining whether the Aussie can regain strength or if it will continue to face pressure from a resurgent U.S. dollar.
The New Zealand dollar, or kiwi, also saw a slight pullback, slipping 0.1% to $0.6198 after falling 0.5% overnight. The kiwi retreated from its own 2024 high of $0.6236, finding support at $0.6178. This pause mirrors the broader trend of cautious trading in the lead-up to crucial economic data releases.
The key risk for the Australian dollar is the earlier mentioned July inflation report, due on Wednesday. This report is expected to show a slowdown in headline inflation to 3.4% from 3.8%, largely due to government rebates for electricity bills.
However, the wide range of forecasts—spanning from 2.7% to 3.7%—is reflective of the uncertainty surrounding the impact of these rebates.
As traders and analysts await the inflation data, Australian retail sales figures for July, due on Friday, will also be under scrutiny. These figures will provide further insights into consumer spending patterns, especially in the context of inflation and economic uncertainty.
A cautious outlook suggests that the Australian dollar may face additional volatility depending on the inflation report’s outcome. If the data shows a more pronounced slowdown than expected, the Aussie could come under further pressure.
Conversely, a higher-than-anticipated inflation rate might renew concerns about the Reserve Bank of Australia’s policy stance, potentially providing some support for the currency. The kiwi may follow a similar path, with movements likely tied to broader market trends and the performance of the Australian dollar.
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