Aussie Pullback Tests 0.71 as CPI Cools and Construction Jumps

AUD Heat Map Shows Broad Aussie Weakness

AUD is soft across the board starting with AUD/USD which is lower by 0.62%. Also, AUD/EUR, AUD/GBP and AUD/JPY are down. While the decline doesn’t look good in the short term, the medium term setup is still bullish for the Aussie.

AUD Sells Off Across USD, EUR, GBP and JPY Crosses

Construction Data Gives The Aussie Some Economic Backbone

Construction work increased 3.4% QoQ, far surpassing the 0.8% forecast and also higher against the reading before of 0.2%. That’s definitely not a recessionary value. Domestic activity is resilient, particularly around building and engineering work.

Construction Work Done Jumps 3.4% Beating Expectations

CPI Cools, But It Doesn’t Clear the RBA

CPI declined to 4.2%. This release could be the reason why the Aussie is broadly lower. This is so because lower headline inflation reduces the urgency for another RBA hike. Surprisingly trimmed mean inflation rose to 3.4% so all in all the data was mixed.

Australia’s Headline Inflation Cools to 4.2%

AUD/JPY Shows Declining Momentum

A couple red bricks have started to show on the AUD/JPY Renko. Nonetheless, the bullish trend setup is still there with the FX cross being above both its 50-SMA and 500-SMA. Momentum is slowing but still remains positive with both the RSI and Z-Score SMA turning lower. So it’s going to take a little longer than expected to hit 114.10 resistance.

AUD/JPY Holds Above Supertrend, 50-SMA and 500-SMA

AUD/USD Within Renko Range

AUD/USD is stuck between the 50-SMA and the positive Supertrend when looking at the Renko chart. The RSI and Z-Score SMA are turning lower. Some more consolidation is required but AUD/USD can truly make a move higher or lower. The long term structure of AUD/USD is still bullish as the bricks are above its 500-SMA.

AUD/USD Is Below The 50-SMA But Above The Long Term 500-SMA

The Verdict

Current Trend Direction: Bullish

Bias: Positive

Support Levels: 0.6833,0.71015,0.70720

Resistance Levels: 0.72715, 0.74070

Medium Term Path: AUD/USD needs to get back above its medium term trend, the 50-SMA to get back bullish in the short to medium term. But it seems as though further consolidation is required for the FX pair. The mixed inflation data didn’t help the situation. Once we get back above the 50-SMA we can look for a test at the 0.72775 resistance level.