Australian Dollar recovers recent losses on higher ASX 200, US Dollar remains calm

• Australian Dollar exhibits sideways movement with a bias to recover recent losses.
• Australia’s S&P/ASX 200 Index mirrors the gains seen on Wall Street overnight, avoiding the upbeat US Inflation data.
• US CPI YoY and MoM rose by 3.2% and 0.4%, respectively, in February.

The Australian Dollar (AUD) consolidates, with a sentiment indicating a potential to recover recent losses on Wednesday. Despite the S&P/ASX 200 Index rising for the second consecutive day, tracking gains on Wall Street overnight, lower commodity prices could exert pressure on the Aussie Dollar. Investor sentiment remains cautiously optimistic following the release of upbeat Consumer Price Index (CPI) data from the United States (US).

Australian Dollar suffered losses against the US Dollar (USD) on Tuesday, driven by a stronger-than-expected CPI report that dampened hopes of a near-term rate cut by the Federal Reserve (Fed). This strengthened the Greenback, potentially creating headwinds for the AUD/USD pair. Traders are likely to shift their focus to the US Core Producer Price Index (PPI) and Retail Sales data scheduled for release on Thursday.

Daily Digest Market Movers: Australian Dollar remains subdued on risk-off sentiment

• Australia’s NAB Business Confidence Index decreased to 0 in February, from 1 in the previous month.
• Australia’s NAB Business Conditions Index improved to 10 from the previous reading of 7 (revised from 6).
• Sarah Hunter, Assistant Governor (Economics) at the Reserve Bank of Australia (RBA), addressed a panel at the AFR Business Summit on Tuesday, discussing fourth-quarter GDP in line with forecasts. Hunter mentioned that recent inflation data also matched expectations, with inflation remaining the primary hindrance to household consumption.
• CIBC discusses the latest US CPI data for February, noting that while the report exceeds consensus expectations, it does not warrant alarm regarding inflation trends.
• According to the CME FedWatch Tool, the probability of a rate cut in March has decreased to 1.0%, while in May it stands at 15.6%. In June, the likelihood of a rate cut is estimated to be 66.6%.
• US CPI (YoY) came in at 3.2% in February, exceeding estimates of 3.1% and above January’s 3.1%. The monthly index printed 0.4% as expected above 0.3% prior.
• US Core CPI increased by 3.8% year-over-year, above the expected 3.7% but below the previous 3.9% reading. While MoM remained consistent at 0.4% against the expected 0.3%.
• The Monthly Budget Statement printed a deficit of $296 billion in February, below the expected deficit of $299 billion. However, it has sharply increased from the previous deficit of $22 billion.
• US Nonfarm Payrolls increased by 275K in February, surpassing January’s figure of 229K and beating expectations of 200K.
• US Average Hourly Earnings (YoY) grew by 4.3%, falling slightly below February’s estimated and previous reading of 4.4%. Monthly, there was an increase of 0.1%, which was lower than the anticipated 0.3% and the previous month’s 0.5%.

Technical Analysis: Australian Dollar tests the psychological support of 0.6600

The Australian Dollar remains positioned above the psychological support of 0.6600 on Wednesday. A breach below this level might propel the AUD/USD pair toward the vicinity of the nine-day Exponential Moving Average (EMA) at 0.6584, coinciding with the 38.2% Fibonacci retracement level of 0.6581. To the upside, the AUD/USD pair could encounter significant resistance at the major level of 0.6650, followed by the previous week’s high of 0.6667. A breakthrough above the latter could provide further momentum for the pair to challenge the psychological barrier of the 0.6700 level.

AUD/USD: Daily Chart