- AUD / USD bounces off its intraday low but remains moderately offered.
- Melbourne extends virus-led lockdown, NSW updates record infections.
- The passage of the US stimulus supports the bulls of the greenback despite fears of a fiscal drama.
- US inflation data, risk headlines will be important for near-term guidance.
AUD / USD pares intraday losses around 0.7342 after bouncing off daily low of 0.7333 in a moderate Asian session on Wednesday.
The Aussie pair rallied the day before amid market optimism following the US Senate’s passage of the infrastructure spending plan. However, following discussions about the US budget and nervousness about viruses from Australia, the citation was challenged before the last corrective withdrawal.
After months of scrambling over details, U.S. Senators have finally passed a $ 1.2 trillion stimulus package that may have fewer hurdles in the House before reaching President Joe Biden for the sign. Given the publication of the long-awaited aid plan, market sentiment improved the day before.
While describing the same, DJI and S&P 500 have discounted record highs while the AUD / USD pair also broke a two-day downtrend.
However, recent headlines fueling the Fed’s tantrums and challenges for US policymakers to overcome the debt limit hurdle appear to be supporting the US dollar due to its safe haven demand.
That said, the US Dollar Index (DXY) recorded a four-day winning streak to reach the July high, while the S&P 500 Futures posted slight losses at the time of publication.
It should be noted that the record number of infections in New South Wales (NSW) and the willingness of policymakers in Melbourne to extend lockdowns caused by the virus for another seven days are adding to the bearish catalysts for the AUD / USD pair. Also weighing on the quotation, Westpac’s consumer confidence for Australia fell to -4.4% from + 1.5% in August.
While virus-related issues and concerns abate, not to mention that the US fiscal dilemma may keep pressure on the AUD / USD, the US Consumer Price Index (CPI) for July, which is expected to drop from 0 , 9% MoM to 0.5%, will be important in determining the short-term shifts. Given the recent mounting discussions on reflation despite fears of the Delta covid variant, higher inflation could help Fed policymakers extend their hawkish bias and weigh on the Aussie pair.
Read: July US CPI Snapshot: Inflation Data Shouldn’t Change Fed Expectations
The bearish MACD and the failures to cross the horizontal 0.7410-15 area, comprising several marked levels since early July, steer the AUD / USD towards a fixed monthly support around 0.7320-15 during the anticipated dip towards a annual low of 0.7288.