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MTrading Team • 2023-12-12

AUDUSD justifies Monday’s Doji to reclaim 0.6600 ahead of US CPI

AUDUSD justifies Monday’s Doji to reclaim 0.6600 ahead of US CPI

Market sentiment remains slightly positive amid mixed signals about the US Federal Reserve’s (Fed) next moves. The easing trade-war fears and a lack of major geopolitical updates also contribute toward cautious optimism.

With this, the US Dollar reverses the latest recovery while tracing the downbeat bond yields. The same also allows Gold and Crude Oil prices to print minor gains as traders prepare for the key US inflation data.

EURUSD licks its wounds ahead of German and Eurozone ZEW sentiment data while GBPUSD edges higher despite mixed UK employment data. Further, USDCAD drops for the third consecutive day while AUDUSD and NZDUSD rise the most among the G10 currency pairs.

Elsewhere, US stock futures remain indecisive while stocks in the Asia-Pacific zone edge higher. Further, BTCUSD and ETHUSD print mild gains amid the broad US Dollar pullback while licking their wounds after falling the most in four months the previous day.

Following are the latest moves of the key assets:

  • Brent oil prints a four-day uptrend around $76.60, up 0.55% intraday by the press time.
  • Gold price recovers from a three-week low, up 0.30% near $1,987 at the latest.
  • USD Index prints the first daily loss in three, down 0.20% on a day near 103.90 as we write.
  • Wall Street closed positive while Asia-Pacific stocks edged higher. Further, equities in the UK and Europe print mild gains at the latest.
  • BTCUSD and ETHUSD print mild gains to around $42,000 and $2,230 by the press time.
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Mixed markets ahead of US Inflation data…

While the pre-data anxiety appears the biggest challenge for the US Dollar bulls, fresh concerns about the US job and inflation conditions also favor the market’s cautious optimism. That said, the US Conference Board signals a fall in Employment trends to 113.05 for November versus 114.16 prior. That said, results from the New York Federal Reserve’s (Fed) survey of Consumer Inflation Expectations also show an easing in the year-ahead inflation forecasts to 3.4% from 3.6% prior and challenged the US Dollar bulls ahead of today’s key Consumer Price Index (CPI). It’s worth noting, however, that the three-year and five-year ahead inflation expectations remained unchanged at 3.0% and 2.7% respectively, which in turn prod the Greenback sellers afterward.

On a different page, China Communist Party (CCP) leaders discussed growth targets and stimulus proposals at the annual Central Economic Work Conference and favored the market sentiment. Additionally, China’s lifting of restrictions on Australian meat imports hints at the receding trade war between the dragon nation and the West.

Meanwhile, news that a missile fired from Houthi-controlled territory in Yemen blew up a commercial vessel (ship) in the Red Sea challenged the market’s optimism and defended the US Dollar bulls, especially after last week’s firmer US jobs report. Additionally, a cautious mood ahead of the key data/events also challenges the US Dollar bears.

Bloomberg cites anonymous sources to suggest the Bank of Japan’s (BoJ) lack of readiness for an immediate change to the current monetary policy. The same joined strong US Treasury bond yields to propel the USDJPY price. However, upbeat prints of Japan’s Producer Price Index (PPI) for November, 0.3% YoY versus 0.1% expected and 0.8% prior, joined a pullback in the bond coupons to weigh on the Yen pair.

Reserve Bank of Australia (RBA) Governor Michele Bullock signaled the Aussie central bank’s cautious approach in fighting inflation while ruling out concerns suggesting the nation’s lag in the inflation fight. It’s worth noting, however, that cautious optimism and China news join strong consumer sentiment data from Australia to defend the AUDUSD bulls. That said, Westpac Consumer Sentiment jumped to an eight-month high of 82.1 for December versus 79.9 previous readings. On the same line, Australia’s weekly readings of the ANZ-Roy Morgan Consumer Confidence gauge also rose to the highest level since February, to 80.8 from 76.4 prior.

Alternatively, Australia’s National Australia Bank Business Survey for November showed that the Business Confidence dropped to the lowest level since early 2020 by printing -9.0 figure, versus -2.0 prior, whereas the Business Conditions eased to +9.0 from +13.0.

  • Strong buy: USDCAD
  • Strong sell: ETHUSD, GBPUSD, Gold
  • Buy: USD Index, Nasdaq, USDJPY

US CPI is the key…

Traders will pay close attention to the US CPI and CPI ex Food & Energy, also known as the Core CPI, for clear directions. Market forecasts suggest a slight reduction in the headline CPI but no change in the Core CPI, which if matched could challenge the latest optimism and renew the US Dollar strength. However, a surprise fall in the US inflation data will pave the ground for the Fed’s dovish hike and can allow the commodities and Antipodeans to extend the latest run-up.

May the trading luck be with you!