AUD/USD gives back major early gains ahead of Aussie Employment data

The AUD/USD pair surrenders a majority of its initial gains during the European session on Wednesday. Still, the Aussie pair trades 0.10% higher to near 0.6540. The pair snaps three-day losing streak as the US Dollar struggles to extend its upside after refreshing three-week high on Tuesday.

AUD/USD Technical Overview

The AUD/USD pair is trading around 0.6530 on Wednesday. The daily chart’s technical analysis indicated a persistent bullish sentiment as the pair is positioned within the ascending channel pattern. The 14-day Relative Strength Index (RSI) hovers around the 50 mark, suggesting that market bias is neutral. However, the pair moved below the nine-day Exponential Moving Average (EMA), indicating that short-term price momentum is weakening.

On the upside, the AUD/USD pair could test the nine-day EMA at 0.6541. A break above this level could strengthen the short-term price momentum and support the pair to approach the eight-month high of 0.6595, which was reached on July 11. Further advances would strengthen the bullish bias and prompt the pair to explore the region around the upper boundary of the ascending channel around 0.6700.

The AUD/USD pair is testing the ascending channel’s lower boundary around 0.6510. A break below the channel would weaken the short-term price momentum and put downward pressure on the pair to navigate the area around the 50-day EMA at 0.6488, aligned with the three-week low at 0.6485.

Fundamental Overview

The US Dollar attracted significant bids on Tuesday after the United States (US) Consumer Price Index (CPI) report for June showed acceleration in prices of goods that are majorly imported. Signs of price pressures accelerating led traders to trim their bets supporting interest rate cuts by the Federal Reserve (Fed) in its September monetary policy meeting.

According to the CME FedWatch tool, the probability for the Fed to cut interest rates in the September meeting has reduced to 55.5% from 64.7% seen a week ago.

Meanwhile, investors brace for further increase in inflationary pressures as the impact of tariffs announced by US President Donald Trump on 22 nations is yet to be fed into the economy.

In Australia, investors await the employment data for June, which will be published on Thursday. Economists expect the Australian economy to have added fresh 20K workers. In May, employers laid off 2.5K workers. The Unemployment Rate is seen steady at 4.1%.

Australian Dollar rises as US Dollar remains stable ahead of PPI data

The US Dollar Index (DXY), which measures the value of the US Dollar against six major currencies, is holding ground at around 98.50 at the time of writing. Traders await the US Producer Price Index (PPI) later on Wednesday, followed by the Fed Beige Book and Industrial Production.

The Associated Press reported that US President Donald Trump is preparing to introduce over 10% tariffs on smaller countries, including nations in Africa and the Caribbean. "We'll probably set one tariff for all of them," Trump told reporters on Tuesday.

The US Consumer Price Index (CPI) rose 2.7% year-over-year in June, matching market expectations. Core CPI came in at 2.9%, just below the 3.0% forecast but still notably above the Federal Reserve’s 2% target. The hotter-than-expected June inflation figures reignited concerns about prolonged high Fed interest rates.

Dallas Fed President Lorie Logan spoke at a World Affairs Council event in San Antonio on Tuesday, noting that the US central bank will probably need to leave interest rates where they are for a while longer to ensure inflation stays low in the face of upward pressure from the Trump administration's tariffs.

President Trump said late Tuesday that Scott Bessent is an option to replace the Fed Chair, but he likes the job that Bessent is doing as US Treasury Secretary, per Reuters. 

Trump has threatened to impose “very severe” tariffs on Russia if no peace deal is reached within 50 days. Trump also warned of secondary tariffs on countries importing Russian Oil. Moreover, Trump, alongside NATO Secretary-General Mark Rutte, confirmed that European allies will purchase billions of dollars’ worth of American-made weapons, such as Patriot missile systems. These weapons will be transferred to Ukraine in the coming weeks to tackle intensified Russian attacks.

The US government immediately imposed a 17% duty on Monday on most imports of fresh tomatoes from Mexico after negotiations ended without an agreement to avert the tariff. Trump announced, on Saturday, a 30% tariff on imports from the European Union (EU) and Mexico starting August 1. He also proposed a blanket tariff rate of 15%-20% on other trading partners, an increase from the current 10% baseline rate. In response, the European Union announced on Sunday that it will extend its pause on retaliatory measures against US tariffs until early August, in hopes of reaching a negotiated agreement.

The US government posted a $27 billion budget surplus in June, fueled by a surge in customs duties revenue, which reached a record $27.2 billion. This jump in tariff collections, largely stemming from policies introduced during the Trump administration, contributed to a 13% increase in total budget receipts, which rose to $526 billion. Meanwhile, federal spending declined by 7% to $499 billion.

Chinese economy expanded at an annual rate of 5.2% in the second quarter, compared to a 5.4% growth in the first quarter and the expected 5.1% growth. Meanwhile, the Chinese Gross Domestic Product (GDP) rate rose 1.1% in Q2, against the market consensus of a 0.9% increase. Moreover, Retail Sales increased by 4.8% YoY in June, against the 5.6% expected and 6.4% prior, while Industrial Production came in at 6.8%, against the 5.6% expected.

The National Bureau of Statistics (NBS) shared its economic outlook during its press conference, stating that overall economic performance in the first half of the year was stable, with steady progress. However, it emphasized the need to improve investment structure and the environment. It also added that the real estate market is heading towards stabilization.