Australian Dollar rises amid softer US PPI

• AUD/USD rises toward 0.7000 as softer US producer inflation weighs on the US Dollar.
• US headline and core PPI came in below expectations, reinforcing signs that inflation pressures may be easing.
• Mixed Chinese data limited the move as weaker GDP growth was offset by stronger Industrial Production and Retail Sales.

AUD/USD trades higher near the 0.7000 level on Wednesday as the Australian Dollar (AUD) benefits from broad US Dollar (USD) weakness following softer-than-expected United States (US) producer inflation data. Stronger Chinese industrial activity and retail spending also supported the Aussie despite slower economic growth.

The US Producer Price Index (PPI) declined 0.3% MoM in June, below expectations for an unchanged reading and reversing May’s 0.6% increase. Annual producer inflation slowed to 5.5% from a revised 6.0%, missing the 6.2% market forecast as well.

Core PPI, which excludes food and energy, increased 0.2% MoM, below the expected 0.4%. The annual underlying rate rose slightly to 4.7% from 4.6% but remained below the 5.2% consensus. The figures reinforced expectations that US inflation pressures may be easing, weighing on the Greenback.

Federal Reserve Bank of New York President John Williams said that the latest June CPI report was consistent with the inflation progress he hopes to see over the coming months. However, Williams added that policymakers do not have a clear direction regarding where interest rates are heading or when they could change.

Chinese data offered mixed signals. Gross Domestic Product expanded 0.9% QoQ in the second quarter, matching expectations but slowing from 1.3%. Annual growth weakened to 4.3%, below the 4.5% forecast and the previous 5.0%.

However, Industrial Production rose 5.3% YoY in June, exceeding expectations of 4.6%, while Retail Sales increased 1.0% after declining 0.6% previously. The stronger activity figures helped ease concerns about Chinese demand and provided additional support to the China-sensitive Australian Dollar.

Short-term technical analysis:

On the 4-hour chart, AUD/USD trades at 0.6996, maintaining a bullish near-term bias as it holds above both the 20-period Simple Moving Average (SMA) at 0.6955 and the 100-period SMA at 0.6924. The pair is probing the upper end of the recent range, with price just under the horizontal resistance line at 0.6999, while the Relative Strength Index (RSI) near 69 suggests firm but increasingly stretched upside momentum.

On the downside, immediate support is seen at 0.6993, ahead of successive horizontal levels at 0.6987 and 0.6983 that mark a short-term demand band, with the 20-period SMA at 0.6955 and the 100-period SMA at 0.6924 reinforcing the broader constructive structure. On the topside, a clear break above resistance at 0.6999 would open the way for further gains, while failure to overcome this barrier could trigger a corrective pullback toward the clustered supports beneath the figure.

(The technical analysis of this story was written with the help of an AI tool. Know more.)