AUD/USD Fundamental Forecast – July 28, 2016

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Updated: Jul 27, 2016, 07:13 UTC

The AUD/USD finished lower at .7472, down 0.0029 or -0.39%. Early in the session, the Forex pair surged to .7564 before breaking sharply lower to .7457.

The catalyst behind the volatility and the lower close was the June quarterly inflation data. The market initially rallied as the headline numbers came out roughly in line with expectations, but sellers started to come in as traders re-evaluated the numbers and decided the underlying inflation trend was still soft. The current year-on-year pace of inflation came in below the Reserve Bank of Australia’s target range.

CPI quarter-on-quarter inflation for the second quarter came in at 0.4%, meeting the estimate. Year-on-year inflation missed the 1.1% estimate, coming in at 1.0%.

The weak inflation data likely means the Reserve Bank of Australia will cut its benchmark interest rate to a record low 1.5 percent at next week’s meeting.

The Aussie is likely to trend lower today because a cut in interest rates will make the Aussie a less desirable investment. Later today, the AUD/USD could feel additional pressure if the U.S. Federal Reserve’s monetary policy statement hints at a possible interest rate hike in September. This move by the Fed will make the U.S. Dollar a more attractive investment.

Traders should continue to look for volatility today especially if the Fed statement raises doubts about a September rate hike.

FxEmpire provides in-depth analysis for each asset we review. Fundamental analysis is provided in three components. We provide a detailed monthly analysis and forecast at the beginning of each month. Then we provide more up to the data analysis and information in our weekly reports, which covers the current week and are published by Sunday before the new week begins. Daily we share any new events, forecasts or analysis that affect the current day. To achieve a full accurate understanding it is important that you study all of our data and analysis as a whole.

Today’s economic releases:

Cur.	Event	Actual	Forecast	Previous
AUD	CPI (YoY) (Q2)	1.0%	1.1%	1.3%
AUD	CPI (QoQ) (Q2)	0.4%	0.4%	-0.2%
AUD	Trimmed Mean CPI (QoQ) (Q2)	0.5%	0.4%	0.2%
EUR	GfK German Consumer Climate (Aug)		9.9	10.1
GBP	GDP (QoQ) (Q2)		0.4%	0.4%
GBP	GDP (YoY) (Q2)		2.0%	2.0%
USD	Core Durable Goods Orders (MoM) (Jun)		0.3%	-0.3%
USD	Durable Goods Orders (MoM) (Jun)		-1.1%	-2.3%
USD	Pending Home Sales (MoM) (Jun)		1.4%	-3.7%
USD	Crude Oil Inventories		-2.257M	-2.342M
USD	Cushing Crude Oil Inventories			0.189M
USD	FOMC Statement
USD	Fed Interest Rate Decision		0.50%	0.50%

Upcoming Economic Events that you should be monitoring:

Thursday, July 28, 2016

Cur.	Event	Actual	Forecast	Previous
GBP	Nationwide HPI (MoM) (Jul)		-0.2%	0.2%
GBP	Nationwide HPI (YoY) (Jul)		4.5%	5.1%
EUR	German Unemployment Change (Jul)		-3K	-6K
EUR	German Unemployment Rate (Jul)		6.1%	6.1%
EUR	German CPI (MoM) (Jul)		0.2%	0.1%
USD	Goods Trade Balance (Jun)		-61.10B	-60.59B
USD	Initial Jobless Claims		260K	253K

Government Bond Auctions

Date/Time Country Type

Jul 27 11:30 Germany Eur 1bn 2.5% Aug 2046 Bund

Jul 28 11:10 Italy Holds bond auction

About the Author

James Hyerczykauthor

James is a Florida-based technical analyst, market researcher, educator and trader with 35+ years of experience. He is an expert in the area of patterns, price and time analysis as it applies to futures, Forex, and stocks.