The US dollar fell on Wednesday after reports emerged that China may be considering either a slowdown or halt to its purchases of US treasuries. This resumption of US dollar weakness helped prompt a short-term rebound for the AUD/USD currency pair ahead of key economic data from both Australia and the US.
From a major support level around 0.7500 back in early December, AUD/USD has been entrenched in a sharp incline for the past month as the US dollar has fallen sharply against its rivals and the Australian dollar has been on a solid rebound. Last week saw the currency pair reach a resistance high around the 0.7875 resistance area before pulling back down near 0.7800 support earlier this week as the US dollar made a modest rebound. With Wednesday’s resumption of weakness in the US dollar, AUD/USD has bounced from the 0.7800 area and could be on track for further gains if the US dollar remains under pressure.
Looking ahead in the short-term to relevant economic data, Australia releases retail sales numbers for November on Thursday. The forecast is for a 0.4% increase in retail sales after the previous month’s better-than-expected 0.5% increase. From the US, Thursday and Friday feature key inflation data for December that may influence the Federal Reserve’s monetary policy outlook, including the Producer Price Index (+0.2% expected), Core PPI (+0.2% expected), Consumer Price Index (+0.1% expected), and Core CPI (+0.2% expected). Also to be released on Friday will be December’s US Retail Sales (+0.5% expected) and Core Retail Sales (+0.4% expected). And Thursday of next week will be focused on key jobs data for December out of Australia.
Ahead of these releases, AUD/USD is currently taking a breather within the context of its month-long bullish trend. Presently trading within a relatively tight range between two key price areas – 0.7875 to the upside and 0.7800 to the downside – the upcoming economic releases are poised to prompt a significant move for the currency pair. With any further US dollar weakness or Australian dollar strength that results in an AUD/USD breakout above 0.7875-area resistance and a resumption of the bullish trend, the next major upside targets for AUD/USD are around the key 0.8000 and 0.8100 resistance levels.