US Greenback In search of a Lifeline in PCE Inflation Knowledge

US DOLLAR, FED, PCE INFLATION, AUD/USD – TALKING POINTS:

• US Greenback regular regardless of Q2 GDP miss, risk-off cues from Amazon steering
• Dedication could also be missing earlier than PCE knowledge because the Fed outlook takes form
• AUD/USD could resume its downtrend if important resistance close to 0.74 is held

The US Greenback was not notably stirred as second-quarter GDP registered decrease than anticipated yesterday. The report confirmed output grew at annualized tempo of 6.5 p.c within the three months by June, whereas analysts had been penciling in a studying at 8.5 p.c.

The forex was equally unmoved as downbeat steering embedded in Q2 earnings stories from key pandemic winners within the tech sector – notably Amazon Inc – triggered danger aversion within the equities house. The benchmark unit’s unmatched liquidity ceaselessly attracts haven demand at occasions of market stress.

Maybe the market remains to be digesting the steering from July’s FOMC coverage announcement. As famous beforehand, the next value motion spoke to a broadly “dovish” learn however the substance of the Fed’ narrative appears to mirror policymakers cautiously acclimating markets to on-coming stimulus withdrawal.

With that in thoughts, merchants could also be reluctant to indicate directional dedication because the highlight turns to June’s PCE knowledge. The Fed’s favored inflation gauge is predicted to place value development at 3.7 p.c on-year, the best in three many years. Pricing knowledge has tended to beat forecasts not too long ago, opening the door for an upside shock.

An outsized enhance could conjure up the specter of ‘stagflation’, the place development charges normalize down because the restoration from Covid lockdowns matures however inflation seems to be sticky. That will bitter sentiment as markets ponder the Fed coverage difficult inherent to such a state of affairs, providing USD renewed help.

AUD/USD TECHNICAL ANALYSIS – AUSSIE DOLLAR DOWNTREND SET TO RESUME?

The Australian Greenback continues to hover at support-turned-resistance within the 0.7384-0.7413 space, a barrier strengthened by a falling trendline defining the down transfer since mid-June. A big Head and Shoulders prime carved out from the beginning of the yr hints at a broadly bearish bias.

The primary main layer of help appears to be within the 0.7222-44 zone. A break under that confirmed on a each day closing foundation could set the stage for the downtrend emanating from the H&S sample to renew. That setup implies an approximated measured transfer all the way down to the 0.7120-30 area.

Establishing a foothold above the 0.7413 appears to be a pre-requisite for neutralizing quick promoting strain. Which may start a restoration that places the 0.76 determine inside patrons’ attain. A transparent-cut invalidation of the near-term downtrend is required to attract agency conclusions nevertheless.

AUD/USD each day chart created withTradingView

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— Written by Ilya Spivak, Head Strategist, APAC at DailyFX.com

To contact Ilya, use the feedback part under or @IlyaSpivak on Twitter