AUD/USD buyers failed to clear resistance near 0.7100 on Thursday, retreating sharply after July US inflation data let the dollar recover some of its earlier losses. A doji pattern at resistance points to a possible corrective decline toward 0.7020–0.7040, though a firm close above 0.7100 would invalidate that scenario.
AUD/USD buyers attempted to test the key resistance level around 0.7100 today. The attempt failed, with the price retreating sharply from the level and forming a doji pattern. The appearance of a doji near resistance signals buyer indecision and raises the odds of a corrective move lower.
US inflation data lifts the dollar
The move came after the release of July US inflation data. The annual Consumer Price Index came in at 3.4%, exactly in line with forecasts and down from the previous 3.5%, while prices rose 0.1% month-on-month. Core inflation also matched expectations, at 0.2% month-on-month and 2.5% year-on-year.
However, the report did not deliver any additional disinflationary surprise. Inflation is gradually moving toward the Federal Reserve's target, but the current pace of decline is still insufficient to significantly strengthen expectations of imminent policy easing. As a result, the US dollar managed to recover some of its earlier losses.
What could move AUD/USD next
A firm break and close above 0.7100 would invalidate the bearish scenario for AUD/USD. Several scheduled events could set the pair's direction into the next session. Reserve Bank of Australia Governor Michele Bullock is due to speak tomorrow at 02:30 GMT+3, followed by Australian housing finance data at 04:30 GMT+3.
US core retail sales, due tomorrow at 15:30 GMT+3, could also weigh on the pair. Stronger-than-expected US figures would support the dollar and add pressure on the Australian dollar, while weaker data could revive expectations of a more dovish Fed and limit the greenback's recovery.
Source: ActionForex
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