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US CPI and Australian employment data attract much attention
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Hello everyone, today XM Foreign Exchange will bring you "[XM Foreign Exchange Official Website]: US CPI and Australian employment data have attracted much attention." Hope it will be helpful to you! The original content is as follows:
On Monday (July 14) European session, the Australian dollar/USD (AUD/USD) trading price was 0.6567, up 0.41% last week, with a cumulative increase of 6.09% this year, the strongest performance among the Australian dollar cross-currency pairs. This week, the market focused on Tuesday's U.S. Consumer Price Index (CPI) data and Thursday's Australian employment report. Previously, the Australian Federal Reserve (RNA) unexpectedly maintained the cash interest rate unchanged at 3.85%, breaking the market's expectations of a 25 basis point interest rate cut, increasing the uncertainty of interest rate policy, and further igniting the market's heated discussion on future trends.
RBA policy stance: prudent and stable, the prospect of interest rate cuts is unclear. Last week, the Australian Federal Reserve (RNA) decided to maintain the cash rate at 3.85%, which was beyond market expectations. Previously, the market generally expected the RBA to cut interest rates by 25 basis points in response to recent signs of slowing inflation. The RBA's cautious attitude may stem from expectations for upcoming quarterly CPI data on July 30. Recent monthly inflation data have shown signs of a ease in inflation, which may provide a basis for future interest rate cuts. Analysts expect the RBA to cut interest rates by 50 basis points in the second half of this year, lowering the cash rate to 3.35%. However, the RBA's consistent conservative wording shows that even rate cuts may be moderate, and it may even adopt a 15 basis point non-traditional decline to re-align the traditional 25 basis point interest rate adjustment framework. This uncertainty has caused the market's speculation about the timing of interest rate cuts to continue to heat up, and traders need to remain highly vigilant.
Australia employment data: key support for RBA policy
Australia's strong labor market has always been an important basis for the RBA to maintain higher interest rates. The unemployment rate stabilized at 4.1% in May, showing the resilience of the labor market. Despite a net decrease of 2,500 jobs in the month, the increase in full-time employment by 38,700 effectively offset the decrease in 41,200 part-time jobs, resulting in less fluctuations in overall employment data. However, participation rates may have peaked in the near future, and the rapid decline in part-time employment (the biggest drop in 14 months) sounded the alarm for the market. If June employment data released on Thursday further reveals a crack in the labor market, dovish voices within the RBA may increase, providing more room for interest rate cuts. Conversely, if employment data performs strongly, the RBA may continue to maintain the status quo, supporting the bullish momentum of the AUD/USD.
U.S. CPI and Fed Policy: Potential Catalysts for the US dollar trend
U.S. June CPI data this Tuesday attracted much attention, especially Fed Chairman Jerome Powell recently mentioned that Trump's tariff policy may push up inflationary pressure in the summer. In April, the core CPI rose only 0.1% month-on-month, and the year-on-year inflation rate fell to 2.8%, the lowest since March 2021. If the June CPI data is weaker than expected and the retail sales and producer price index (PPI) are also weak, market expectations for the Fed's interest rate cut in September may rise from the current rate of about 60% to more than 70%. This will weaken the US dollar and provide upside room for the AUD/USD. On the contrary, if inflation data continues to rise, the US dollar may gain support, limiting the upward potential of the AUD/USD. In addition, speeches by several Fed officials this week will also provide further policy clues to the market.
State Sentiment and Correlation Analysis
The Australian dollar/USD performance after the RBA (RNA) decision showed strong resilience, although its correlation with the New Zealand dollar (NZD), RMB (CNY) and US dollar index (DXY) has weakened. Last week, the Australian dollar/NZD (AUD/NZD) soared 1.3%, the biggest single-week gain since September last year, while the Australian dollar/USD closed up for the third consecutive week, showing continued bullish momentum. The 60-day rolling correlation data shows that the Australian dollar/USD is strongly negatively correlated with the US dollar index (-0.85), and strongly positively correlated with the New York dollar (0.85), RMB (0.76), copper price (0.84) and the S&P 200 index (0.75). This shows that the AUD/USD is highly sensitive to USD trends and global risk sentiment (especially www.xmhouses.commodities and China-related assets). Unless Thursday’s employment data significantly worse than expected, the AUD/USD correction may be short-lived and limited in scope.
Futures Market Positioning: Short sentiment heats up
According to the U.S. www.xmhouses.commodity Futures Trading www.xmhouses.commission (CFTC) position report, the net short positions of large speculators rose to a 15-week high of 74,300 lots, and the net short positions of asset managers also reached a 15-week high of 38,200 lots. However, overallThe position increased by 5,000 lots, while the short position decreased by 2,200 lots, indicating that there are certain differences in the market positioning. Despite the increased short sentiment, the recent rise in the AUD/USD suggests that shorts may face pressure to squeeze positions, especially as bullish momentum continues.
Technical analysis: The bullish trend continues, 0.65 is the key support
From a technical perspective, the Australian dollar/USD is currently in the upward channel, and the 0.65 mark is the key support, approaching the high trading volume area since late April. Last week, the pair hit an eight-month high of 0.6595, and if it breaks through this level, it may further rise to 0.6680. Technical indicators support short-term bullish trends, with the Relative Strength Index (RSI) above 50, and the Nine-Day Index Moving Average (EMA) showing a bullish cross. However, if the U.S. data or Australian employment data trigger bearish sentiment, the 0.65 support level may face a test. In the short term, 0.6550 and 0.6524 are the secondary support levels, and 0.6595 and 0.6680 are the key resistance levels.
Outlook and trading strategies
The Australian dollar/USD remains cautiously bullish in the short term, supported by Australia's strong labor market and www.xmhouses.commodity prices, but the cautious stance of the RBA and the potential strength of the US dollar may limit gains. If the US CPI data is softer, the US dollar may be under pressure, pushing the Australian dollar/US dollar upward; but if the Australian employment data is less than expected, the risk of a pullback to the 0.65 support level will increase. Traders need to keep an eye on Tuesday's U.S. CPI, Thursday's Australian employment report, and the quarterly CPI data on July 30 will be the key catalysts that determine the future trend. It is recommended to look for buying opportunities around 0.65, but stop loss is required to deal with potential downside risks.
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