Commodity Currencies Strengthen After U.S. Inflation Data Release

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Yesterday's data showed that U.S. inflation for July dropped to 2.9%. Given that the Federal Reserve will consider inflation and labour market figures when deciding on rates at the September meeting, the steady decline in the core Consumer Price Index (CPI) was expected to put downward pressure on the USD. However, the market's reaction to the U.S. inflation decrease was relatively muted, judging by the movement of major currency pairs. The Australian and Canadian dollars paused the upward correction they started late last week. However, since strategic supports remain intact, a resumption of medium-term growth is still possible.

AUD/USD

Technical analysis of the AUD/USD pair indicates the possibility of continued upward movement if the price can firmly establish itself above the 0.6650-0.6630 range. If these levels turn into support, the pair could test the 0.6770-0.6700 range.

The bullish sentiment is further supported by the “hammer” pattern formed on August 5th. This formation could be invalidated if the price falls below 0.6500-0.6470.

Key events that could influence the pair's movement include:

  • Today at 15:30 (GMT +3:00): the release of the Philadelphia Fed Manufacturing Index (U.S.)
  • Today at 15:30 (GMT +3:00): the release of initial jobless claims (U.S.)
  • Tomorrow at 02:30 (GMT +3:00): a speech by Reserve Bank of Australia Governor Michele Bullock

Read analytical AUD/USD price forecasts for 2024 and beyond.

USD/CAD

Technical analysis of the USD/CAD pair suggests the possibility of continued downward movement if the price breaks below 1.3700. In early August, several bearish reversal patterns, such as the “bearish engulfing” and “three black crows”, were formed on the daily timeframe. The development of these patterns pushed the pair below the 1.3820-1.3800 levels, but the downward movement has since slowed around the current levels. If the sellers manage to break the support at 1.3700, the pair’s downward movement could continue towards 1.3600-1.3580.
A break above 1.3750 could invalidate the bearish scenario.

The following news could impact the pair's price movement today:

  • 15:30 (GMT +3:00): U.S. retail sales for July
  • 15:30 (GMT +3:00): Canadian wholesale sales for June