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AUD/USD recovers from multi-week low to 0.6760 ahead of Aussie Q4 CPI

  • AUD/USD snaps the recent downward trajectory amid risk reset.
  • News that China’s coronavirus will be on the peak in 10 days and enough global efforts to tame the epidemic strengthened trade sentiment.
  • AU Westpac Leading Index, Aussie Q4 CPI and FOMC will decorate the economic calendar.

AUD/USD consolidates losses to 0.6760 at the start of Wednesday’s Asian session. The Aussie pair recently benefited from receding threats concerning China’s fatal coronavirus. Even so, today’s fourth quarter (Q4) Australian CPI and Trimmed Mean CPI will be the key to watch.

China tries to placate traders…

Zhong Nanshan, a renowned Chinese respiratory expert, said on Tuesday that the coronavirus may reach its peak in one week or around 10 days and then there will be no large-scale increases. The same helped to ease the market’s fear of the fatal contagion. The cautious optimism was also backed by the comments from Chinese President Xi Jinping who said to be confident and capable of winning the battle against the virus.

Increased efforts from the global entities also add to the expectations that the worst will be over soon. The World Health Organization (WHO) is ready to send its troops to China after terming the disease as a “high” risk.

Further to placate the investors, China’s central bank, People’s Bank of China (PBOC), as well as Securities Regulatory Commission both requested investors’ to adhere to the concept of long-term investment and value investment while staying ready to pump in liquidity in the markets in a timely manner.

On the other hand, upbeat data from the US and comments from the US President Donald Trump that the Federal Reserve should cut interest rates might have weighed on the pair.

With this, the US 10-year Treasury yields recovered nearly five basis points from the lowest since early-October to 1.65% whereas Wall Street also registered mild gains by the end of their Tuesday trading.

While qualitative headlines are to keep the driver’s seat, traders’ immediate attention will be on Australia’s December monthly Westpac Leading Index, -0.09% prior, ahead of the key Q4 Consumer Price Index (CPI) and Trimmed Mean CPI. Market consensus favors no change in the RBA Trimmed Mean CPI figure of 0.4% QoQ whereas the headline CPI could increase to 0.6% from 0.5% prior.

Despite recent weakness in Australia’s NAB Business Confidence and Conditions indicating softer employment figures, the inflation numbers could keep the odds of RBA’s rate cut low. With this, an upbeat print could extend the Aussie pullback while downbeat readings may have to accompany more bad news from China.

Technical Analysis

Unless bouncing back beyond a confluence of 100-day SMA and an upward sloping trend line since October, the previous support, around 0.6840 now, buyers are less likely to enter the trading.

 

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