- AUD/USD bounces off intraday low but remains mildly offered.
- Melbourne extends virus-led lockdown, NSW refreshes record infections.
- US stimulus passage backs the greenback bulls despite fears of budget drama.
- US inflation data, risk headlines will be important for near-term directions.
AUD/USD pares intraday losses around 0.7342 after bouncing off the day’s low of 0.7333, during a subdued Asian session on Wednesday.
The Aussie pair recovered the previous day amid the market’s optimism following the US Senate’s passage of the infrastructures spending plan. However, following chatters over the US budget and virus jitters from Australia challenged the quote before the latest corrective pullback.
After months of jostling with details, US Senators finally passed a $1.2 trillion stimulus that might get fewer hurdles in the House before reaching President Joe Biden for the sign. Given the release of the much-awaited aid package, market sentiment improved the previous day.
While portraying the same, DJI and S&P 500 refreshed record tops whereas the AUD/USD pair also snapped a two-day downtrend.
However, recent headlines fueling the Fed tapering tantrums and challenges for the US policymakers to overcome the debt limit hurdle seem to underpin the US dollar due to its safe-haven demand.
That said, US Dollar Index (DXY) printed a four-day winning streak to poke July’s high whereas the S&P 500 Futures print mild losses by the press time.
It’s worth noting that the record high infections in New South Wales (NSW) and Melbourne policymakers’ readiness to extend the virus-led lockdowns for another seven days adds to bearish catalysts for the AUD/USD pair. Also weighing on the quote is the Westpac Consumer Confidence for Australia that dropped to -4.4% versus +1.5% for August.
Although, the virus woes and tapering concerns, not to forget the US budget dilemma can keep AUD/USD pressured, US Consumer Price Index (CPI) for July, expected to ease from 0.9% MoM to 0.5%, will be important to determine short-term moves. Given the recently rising chatters over reflation despite Delta covid variant fears, stronger inflation may help the Fed policymakers to extend their hawkish bias and weigh on the Aussie pair.
Read: US July CPI Preview: Inflation data unlikely to change Fed tapering expectations
Technical analysis
Bearish MACD and failures to cross 0.7410-15 horizontal area, comprising multiple levels marked since early July, directs AUD/USD towards monthly flat-line support around 0.7320-15 during the anticipated fall towards a yearly low of 0.7288.