Australian Dollar moves little following mixed Chinese CPI

• The Australian Dollar holds ground as RBA's Bullock warned that inflation risks persist.
• China’s Consumer Price Index rose 0.1% YoY, while the monthly CPI fell by 0.1% in June.
• President Trump may announce soon a 50% tariff on imported copper and a 200% tariff on pharmaceutical imports.

The Australian Dollar (AUD) remains steady against the US Dollar (USD) on Wednesday after registering more than 0.50% gains in the previous session. The AUD/USD pair moves little following the release of the Consumer Price Index (CPI) data from China, Australia's close trading partner.

China’s Consumer Price Index climbed 0.1% year-over-year in June after declining 0.1% in May. The market consensus was 0% in the reported period. Meanwhile, the monthly CPI decreased by 0.1% against the expected 0% reading. Moreover, Producer Price Index (PPI) fell 3.6% YoY in June, following a 3.3% decline in May. The data came in lower than the market consensus of 3.2%.

The AUD/USD pair appreciated as the Reserve Bank of Australia (RBA) Governor Michele Bullock said in a post-meeting conference that inflation risks persist due to elevated unit labor costs and weak productivity, which could push inflation above forecasts.

RBA Governor Bullock also added that the full effects of previous rate cuts of 50 basis points have yet to be realized. She mentioned that more data and developments will be available by the next meeting. On Tuesday, Australia’s central bank left the Official Cash Rate (OCR) unchanged at 3.85%, against the highly anticipated 25 basis point rate cut in July.

RBA Deputy Governor Andrew Hauser stated early Wednesday that the global economy is facing an enormous amount of uncertainty. Hauser expressed surprise at how markets are shrugging and moving on. He also added that tariff effects on the global economy are profound and are likely to weigh on growth.

Australian Dollar holds steady as US Dollar remains firm amid ongoing tariff concerns

• The US Dollar Index (DXY), which measures the value of the US Dollar against six major currencies, remains steady after two days of gains and is trading at around 97.50 at the time of writing. Traders will likely observe the Federal Open Market Committee (FOMC) Minutes later in the North American session.
• US President Donald Trump said on Tuesday that he will announce a 50% tariff on imported copper and indicated that steeper sector-specific levies are forthcoming. Trump also said he would soon announce tariffs “at a very, very high rate, like 200%,” on pharmaceutical imports.
• The White House announced late Monday that US President Donald Trump has signed an executive order delaying the implementation of new tariffs from July to August 1, per Bloomberg. Trump renewed his threat of a 25% tax on imports from Japan and South Korea and shared a batch of other letters to world leaders warning of levies from 1 August. Trump also imposed 25% rates on Malaysia, Kazakhstan, and Tunisia, while South Africa would see a 30% tariff and Laos and Myanmar would face a 40% levy. Other nations hit with levies included Indonesia with a 32% rate, Bangladesh with 35%, and Thailand and Cambodia with duties of 36%.
• US President Donald Trump posted on social media on Monday that “Any Country aligning themselves with the Anti-American policies of BRICS, will be charged an ADDITIONAL 10% Tariff. There will be no exceptions to this policy.”
• The People’s Bank of China (PBoC) announced measures to further open its capital markets by supporting more onshore investors to invest in offshore bonds. China’s central bank is preparing to expand the Bond Connect program to include a wider range of domestic institutions, such as brokers, mutual funds, wealth managers, and insurers. This follows earlier reports that authorities are considering doubling the quota of the Southbound Bond Connect program to the equivalent of USD 139 billion. Any change in the Chinese economy could impact the AUD as China and Australia are close trading partners.
• The Financial Times reported that China is increasingly rerouting its exports through Southeast Asia to circumvent US tariffs imposed by the Trump administration. In May, direct shipments from China to the US fell by 43% in May, while China's overall exports climbed by 4.8%. This shift was marked by a 15% surge in exports to Southeast Asia and a 12% increase to the European Union (EU). However, the US trade agreement with Vietnam now includes a 40% tariff on trans-shipped goods to curb such practices.
• Australian Treasurer Jim Chalmers said that the Reserve Bank of Australia’s decision to hold rates was neither the outcome millions of Australians had hoped for nor what markets had anticipated. Chalmers added that the central bank has signaled a clear direction on inflation and interest rates moving forward.

Australian Dollar targets nine-day EMA barrier after breaking above 0.6500

The AUD/USD pair is trading around 0.6530 on Wednesday. The daily chart’s technical analysis indicated a persistent bullish sentiment as the pair is positioned within the ascending channel pattern. The 14-day Relative Strength Index (RSI) remains slightly above the 50 mark, strengthening the bullish bias. However, the pair stays below the nine-day Exponential Moving Average (EMA), indicating that short-term price momentum is weaker.

The AUD/USD pair targets the primary barrier at the nine-day EMA of 0.6535. A successful break above this level could strengthen the short-term price momentum and support the pair to approach the eight-month high of 0.6590, recorded on July 1. Further advances would open the doors for the pair to explore the region around the upper boundary of the ascending channel around 0.6680.

On the downside, the AUD/USD pair may find its initial support at the ascending channel’s lower boundary around 0.6510, followed by the 50-day EMA at 0.6475. A break below this crucial support zone would dampen the medium-term price momentum and open the doors for the pair to test the two-month low at 0.6372.

AUD/USD: Daily Chart