Wednesday, July 27, 2016

AUD/USD was choppy in the Asian session

0.7251 0.7339 0.7440 0.7560 0.7701 0.7835
•AUD/USD was choppy in the Asian session. The pair posted slight losses in European trade and is unchanged early in the North American session
•0.7440 is under strong pressure in support
•0.7560 is has strengthened in resistance following gains by AUD/USD on Wednesday
•Current range: 0.7440 to 0.7560
AUD/USD ratio has shown movement towards long positions. Currently, long positions retain a majority (58%), indicative of trader bias towards AUD/USD reversing directions and moving higher.
The Australian dollar has posted losses on Wednesday, erasing the gains from the Tuesday session. In the North American session, AUD/USD is trading slightly above the 0.7470. On the release front, Australian CPI posted a gain of 0.4%, matching the forecast. In the US, economic indicators were dismal. Core Durable Goods Orders and Durable Goods Orders both posted declines. As well, Pending Homes Sales posted a small gain of 0.2%, well below expectations. Later in the day, the Federal Reserve will conclude its meeting and issue a policy statement. On Thursday, the US will release Unemployment Claims.
Australia released a highly-anticipated CPI reading for the second quarter on Wednesday. The index rebounded nicely, posting a gain of 0.4%, compared to a decline of 0.2% in the first quarter. It’s not clear how the RBA, which will set interest rates next week, will respond to the CPI release. The markets have priced in a 50% chance that the bank will lower rates, and an unexpected CPI reading could have swayed the odds of a rate cut. However, the reading matched the forecast, so the question of whether the RBA will act remains up in the air. The annual inflation rate stands at just 1.0%, well below the RBA’s stated target of 2% to 3%. Will this be enough of a factor to prod the RBA into action? We’ll have to wait and see. Many economists see interest rates steadily declining, with Capital Economics chief analyst Paul Dales projecting that rates could drop as low as 1%.