Bias: The Australian dollar remains bullish-to-range-bound, sitting above the 90-day average and in the upper half of the 3-month range.
Key drivers:
- Rate gap: The Reserve Bank of Australia is signaling potential interest rate hikes, contrasting with the Federal Reserve which may not tighten as aggressively.
- Risk/commodities: The recent drop in Chinese inflation has raised concerns about demand for Australia's commodity exports, particularly iron ore, which could weigh on the AUD.
- One macro factor: Upcoming Australian CPI and labor force reports are expected to influence the AUD’s trajectory and could either support a stronger currency or highlight economic weaknesses.
Range: The AUD/USD pair is likely to drift within the upper half of its recent 3-month range as it reacts to upcoming economic indicators.
What could change it:
- Upside risk: Strong domestic economic data could boost confidence in the AUD.
- Downside risk: Continued weakness in Chinese economic indicators could undermine demand for Australian exports and negatively impact the AUD.
