AUD/USD Underpinned by Softer USD & Equity Bid

A combination of a weaker Dollar and recovery in risk assets has underpinned the Australian Dollar in recent sessions with the currency back to 0.7150. This has largely been helped by recent comments from Fed’s Bostic who hinted at the potential of a Fed pause in September, should data permit. Now while this is noteworthy in the sense that this is the first Fed official to signal the possibility of a pause, speculation of such action has been mild at best and of course, is very much data-dependent. For now, inflation remains sticky and thus the bearish argument for the USD remains muted, the Fed will continue to be hawkish and have little desire to pivot away from this.
 

Core PCE In Focus

Looking ahead, today will see the release of the PCE and Core PCE Price Index, the latter being the Fed’s preferred measure of inflation. Core PCE is seen dipping to 4.9% from 5.2%, while the data is not normally a notable mover for markets, the market reaction will depend on the deviation away from market consensus. Elsewhere, today is spot month-end (two days before actual month-end), which could see a bout of USD demand, prompting a modest pullback in AUD/USD. On the technical front, key resistance is situated at 0.7255-65, while support resides at 0.7040.

AUD/USD Chart: Daily Time Frame

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