AUD/USD Forex Technical Analysis – Short-Sellers Exerting Pressure Ahead of US CPI Report

The Australian Dollar is under pressure early Monday as the U.S. Dollar stood tall as traders continued to short the commodity-linked currency on worries about the risk of a global downturn. Specifically, the Aussie is being capped by weakness in copper and iron ore, both of which are big contributors to the country’s export bottom-line.

Aussie traders are also monitoring the volatile crude oil market, which faces further downside pressure due to Chinese economic data and European energy security.

At 03:08 GMT, the AUD/USD is trading .6829, down 0.0029 or -0.42%. On Friday, the Invesco CurrencyShares Australian Dollar Trust ETF (FXA) settled at $67.24, down $0.51 or -0.75%.

On Friday, stronger-than-expected U.S. Non-Farm Payrolls helped boost the AUD/USD because it eased concerns about a U.S. recession. Wednesday’s U.S. CPI report will be an important piece of the puzzle as to whether the Fed decides to lift interest rates 50 or 75 basis points at its July 26-27 monetary policy meeting.

A high consumer price index (CPI) report would likely mean the Federal Reserve would need to raise rates even more aggressively.

Short-Term Outlook

Trader reaction to the minor pivot at .6863 is likely to determine the direction of the AUD/USD on Monday.

Bearish Scenario

A sustained move under .6863 will indicate the presence of sellers. After trading through the former main bottoms at .6811 and .6777, the AUD/USD could retest last week’s low at .6762.

Aggressive counter-trend buyers may come in to defend .6762 because this is the last potential support standing between the May 15, 2020 main bottom at .6402.

Bullish Scenario

A sustained move over .6863 will signal the presence of buyers. This could lead to a labored rally with a short-term retracement zone at .6916 to .6952 the next target. This is the last potential resistance before the .6964 main bottom.

Taking out .6964 will change the main trend to up.