AUD/USD shrugs off sharp inflation fall

Australian CPI crashes

The was gloomy news on the inflation front, as consumer inflation in the second quarter fell by 1.9%, close to the forecast of -2.0%. This marked a record decline, reflecting weak economic conditions. The country is dealing with a massive debt, rising unemployment and weak global demand for the crucial export industry.

Despite this laundry list of economic woes, the Australian dollar continues to defy the naysayers. The currency shrugged off the woeful inflation reading and touched 0.7194 earlier on Wednesday, its highest level since April 2019. AUD/USD appears set to break above the symbolic 0.72 line in short order.

Fed decision next

Later in the day, the Federal Reserve will announce its rate decision. The Fed is widely expected to leave the benchmark rate between 0-0.25%, so what will be of interest to traders is the rate statement. Fed Chair Powell has insisted that negative rates are not an option, but the Fed is likely to maintain an ultra-accommodative stance until the US economy shows unmistakable signs that it is on the path to recovery. This means that the Fed decision is likely to be a sleeper as far as the markets are concerned, unless the Fed surprises everyone with further easing measures.

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AUD/USD Technical

AUD/USD is trading at 0.7170, up 0.17% on the day. The pair posted gains in the Asian session but has given up most of those gains in European trade.

• 0.7121 is providing support. Below, the 10-day MA is a support level, followed immediately by support at 0.7085
• 0.7185 was tested in resistance late in the Asian session. This is followed by resistance at 0.7213

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