AUD/USD clings to modest gains above 0.7150 ahead of Australian inflation data

• AUD/USD rose into the positive territory in the American session.
• Falling US Treasury bond yields don’t allow the USD to gather strength.
• Focus shifts to second-quarter inflation report from Australia.

The AUD/USD pair edged lower toward 0.7100 during the first half of the day but gained traction during the American session as the USD, once again, came under bearish pressure. As of writing, the pair was up 0.2% on the day at 0.7163.

Slumping US T-bond yields weigh on USD

Although the greenback gathered strength against its rivals with the US Dollar Index (DXY) rebounding to 94.00 on Tuesday, it failed to attract investors after the Fed announced that it extended its lending facilities to the end of 2020.

The US Treasury bond yields turned south following the Fed’s statement and forced the DXY to turn south. At the moment, the 10-year US T-bond yield is down 6% on the day and the DXY is posting small daily losses at 93.62.

Earlier in the day, the data from the US showed that the consumer sentiment deteriorated in July with the CB Consumer Confidence Index dropping to 92.6 from 98.3 in June. 

In the early trading hours of the Asian session, second-quarter inflation data from Australia will be looked upon for fresh impetus. Markets are expecting the Reserve Bank of Australia’s (RBA) Trimmed Mean CPI to drop to 1.4% on a yearly basis in Q2. 

Previewing this data, “worse-than-anticipated numbers could take their toll on the Aussie, but a sustained decline is out of the picture for now,” said FXStreet’s Chief Analyst Valeria Bednarik. “Upbeat numbers, on the other hand, can push the AUD/USD pair above the 0.7182 year-high, particularly considering the US dollar will likely remain weak ahead of Q2 GDP figures and the Fed Monetary Policy decision.”

Technical levels to watch for