AUD to USD Forecast: US Producer Price Index to Deliver Sub-$0.65

Highlights

• It is the morning after the US CPI Report, leaving investors to consider sentiment toward Fed monetary policy.
• Later today, the producer price index and prelim Michigan consumer sentiment numbers from the US will need consideration.
• The near-term technical indicators remain bearish, signaling a return to sub-$0.65.

On Thursday, the AUD/USD fell by 0.20% to end the day at $0.65148. The US CPI Report dragged the Aussie dollar into negative territory.

This morning, there are no economic indicators from Australia or China to influence. The lack of economic indicators will leave the Aussie dollar in the hands of market risk sentiment throughout the morning session. Economic uncertainty stemming from weak economic indicators from China and the Fed threat remain headwinds.

The US Session

It is another big day ahead, with US producer price index numbers and the Michigan Consumer Sentiment survey in focus. A more marked increase in the producer price index and improving consumer confidence would give the Fed more food for thought.

Economists forecast the producer price index to increase by 0.2% in July, following a 0.1% increase in June. However, economists expect the Michigan Consumer Sentiment Index to slip from 71.6 to 71.0.

The producer price index shows the direction of selling prices received by domestic producers. Significantly, the PPI includes selling prices from the first commercial transaction for products and services, a leading indicator for consumer price inflation. Upward trends in the producer price index signal a pickup in consumer inflationary pressures.

Beyond the economic calendar, investors should monitor the news wires for Fed chatter throughout the day.

AUD/USD Price Action

Daily Chart

The Daily Chart showed the AUD/USD hover at the lower level of the $0.6545 – $0.6526 support band. Significantly, the Aussie remained below the 50-day ($0.66668) and 200-day ($0.67325) EMAs, sending bearish near and longer-term price signals.

The 50-day EMA fell further from the 200-day EMA, sending bearish price signals.

Looking at the 14-Daily RSI, the 36.23 reading signals a bearish trend and supports a fall to sub-$0.65. However, an AUD/USD move through the 0.6545 – 0.6526 support band would give the bulls a run at the $0.6600 – $0.6620 resistance band.

4-Hourly Chart

Looking at the 4-Hourly Chart, the AUD/USD hovers at the lower level of the $0.6545 – $0.6526 support band. Significantly, the AUD/USD remains below the 50-day ($0.65777) and 200-day ($0.66630) EMAs, sending bearish near and longer-term price signals.

The 50-day EMA pulled back from the 200-day EMA, a bearish price signal.

Looking at the 14-Daily RSI, the 42.29 reading signals a bearish trend and supports a fall to sub-$0.65. However, an AUD/USD move through the 0.6545 – 0.6526 support band would give the bulls a run at the 50-day EMA ($0.65777) and the $0.6600 – $0.6620 resistance band.