Bias: The AUD/USD is currently bullish-to-range-bound, as it sits above the 90-day average and in the upper half of the 3-month trading range.
Key drivers:
- Rate gap: The Reserve Bank of Australia's (RBA) potential interest rate hikes could attract more investment into the AUD compared to the US Federal Reserve's softer policy stance.
- Risk/commodities: Recent weakness in Chinese inflation has raised concerns about demand for Australian exports, particularly iron ore, which may pressure the AUD.
- One macro factor: Upcoming Australian economic indicators, including the Consumer Price Index and Labour Force report, will provide more clarity on domestic economic strength.
Range: The AUD/USD is likely to drift within the recent 3-month range as it balances domestic policy expectations against external pressures.
What could change it:
- Upside risk: Stronger-than-expected economic data from Australia could reinforce AUD strength.
- Downside risk: Any dovish signals from the Federal Reserve or further negative developments in China could weaken the AUD.