• The safe-haven dollar declined on Wednesday amid improved risk sentiment.
  • The market focus is on the US inflation report.
  • Philadelphia Fed President Patrick Harker conveyed that interest rates are already sufficiently high.

Today’s AUD/USD price analysis is bullish. The safe-haven dollar declined on Wednesday amid improved risk sentiment, despite fresh indications of struggles in the Chinese economy.

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State-owned Chinese banks engaging in dollar selling contributed to the yuan’s recovery from a one-month low. Moreover, this happened even as China entered a state of deflation. Furthermore, it positively affected the Australian dollar, which rebounded from multi-month lows. Aussie dipped on Tuesday, reaching its lowest point since June 1 at $0.6497.

The dollar eased despite concerns about global growth stemming from China’s economic indicators. Notably, China experienced the first drop in consumer prices in over two years in July. 

Meanwhile, the US inflation data set to come out on Thursday carries immense significance. It will shape the market’s understanding of the Federal Reserve’s course of action.

Notably, there were mixed signals from Fed officials recently. Philadelphia Fed President Patrick Harker conveyed that interest rates are already sufficiently high. He stated that unless there is a sudden shift in the recent economic data, the Fed might be able to maintain the current interest rates. This aligns with the views of Atlanta Fed President Raphael Bostic.

However, the Fed’s stance has not been consistent. Fed Governor Michelle Bowman indicated on Monday that further rate hikes are probable. Meanwhile, traders still heavily favor a quarter-point rate increase at the next policy meeting in September, with an 86.5% probability.

AUD/USD key events today

The pair will likely consolidate ahead of the US inflation report as investors are not expecting key Australian or US releases today.

AUD/USD technical price analysis: Aussie returns after 0.6500 support.

AUD/USD technical price analysis
AUD/USD 4-hour chart

On the charts, AUD/USD has rebounded after finding support at the 0.6500 level. The price is currently above 30-SMA, while the RSI is over 50. This indicates an imminent shift in sentiment from bearish to bullish.

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Bulls will take control when the price closes above the 30-SMA. However, the price must break above the 0.6600 resistance to confirm the start of a bullish trend to make a higher high. If the resistance holds, the price will likely enter a period of consolidation.

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Source: https://www.forexcrunch.com/aud-usd-price-analysis-aussie-bids-amid-improved-risk/