AUD/USD Forecast: Aussie Dips on Weak Chinese Inflation

• The US reported the smallest increase in job gains in two-and-a-half years.

• Investors expect a 5% annual increase in core US inflation for June.

• China’s factory-gate prices experienced the sharpest decline in seven-and-a-half years in June.

Today’s AUD/USD forecast is bearish. On Monday, the dollar rebounded from its initial decline. Consequently, it recovered from an immediate reaction to data indicating the smallest increase in US job gains in two-and-a-half years. Meanwhile, disappointing inflation figures in China put pressure on the Australian dollar. 

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Notably, the US employment report revealed that nonfarm payrolls only increased by 209,000 in June. This figure fell short of market expectations for the first time in 15 months. However, a closer look at the employment report indicated ongoing robust wage growth, indicating a tight labor market. 

The focus now shifts to US inflation data scheduled for release on Wednesday, with expectations of a 5% annual increase in core CPI for June.

Elsewhere, data released on Monday revealed that China’s factory-gate prices experienced the sharpest decline in seven-and-a-half years in June. Meanwhile, consumer inflation reached its lowest point since 2021. This fueled hopes for additional support measures from Chinese authorities.

China’s post-pandemic recovery, which initially showed strong progress in the first quarter, has now experienced a slowdown.

The weak data negatively impacted the Australian and New Zealand dollars, often used as proxies for the Chinese yuan. OCBC currency strategist Christopher Wong stated, “The softer CPI is still reflecting weak domestic demand while PPI deflation underscores the strains on factories.” Therefore, there is a need for stimulus support in China.

AUD/USD key events today

Today will be a quiet session for AUD/USD as no key economic report will come from Australia or the US. Therefore, investors will likely keep digesting the US jobs report.

AUD/USD technical forecast: Bears set sights on range support as the price consolidates.

AUD/USD has fallen below the 30-SMA after a recent surge to the 0.6700 resistance level. The market has no clear direction as the price oscillates between the 0.6600 support and the 0.6700 resistance.

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At the moment, bears are in the lead as the price trades below the SMA while the RSI has gone slightly below 50. Therefore, the price will soon retest the range support at 0.6600. A break below this level would finally give direction to this market. Otherwise, it will bounce higher and continue oscillating.

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