The Australian Dollar (AUD) remained stable against the US Dollar (USD) after Retail Sales data showed no growth in July, falling short of expectations. However, the USD received support from stronger-than-expected US GDP data for the second quarter. The AUD/USD pair could see further gains due to higher-than-expected Consumer Price Index (CPI) data for July, leading to expectations of a more hawkish policy stance by the Reserve Bank of Australia (RBA).
Despite the positive US economic data, dovish comments from Federal Reserve officials may limit the USD’s gains. Markets are anticipating at least a 25 basis point rate cut by the Fed in September, with the US Personal Consumption Expenditure (PCE) Price Index for July set to provide further insights into the future direction of US interest rates. The RBA Minutes and recent comments from officials indicated that a rate hike may be unlikely in the near term.
Technical analysis shows the AUD/USD pair testing the lower boundary of an ascending channel, suggesting a potential reinforcement of the bullish bias. Resistance lies at the lower boundary of the channel and a break above could lead to further gains. On the downside, support is near the nine-day Exponential Moving Average (EMA), with potential throwback levels at 0.6575 and 0.6470.
The Australian Dollar’s value is influenced by factors such as interest rates set by the RBA, the price of Iron Ore (Australia’s largest export), the health of the Chinese economy, inflation, growth rate, and Trade Balance. Positive surprises in Chinese growth data can boost the AUD, while higher Iron Ore prices tend to strengthen the currency. Additionally, a positive Trade Balance can lead to a stronger AUD.
In conclusion, the Australian Dollar’s steady position against the US Dollar following Retail Sales data and the potential for further gains due to strong CPI data indicate a positive outlook. While the USD has received support from US economic data, dovish comments from Federal Reserve officials may limit its gains. The upcoming US PCE Price Index release and RBA policy stance will be crucial factors to watch for in determining the future direction of both currencies.
