Markets Awaiting US Inflation Data: What is the Probability of Trend Reversals?

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The major currency pairs are in a holding pattern following the release of the latest US labour market data and Jerome Powell's testimony before Congress. The Fed Chair noted that the Federal Reserve has made "significant progress" in its mission to combat inflation, but emphasized the need for "more good data" before lowering interest rates. Judging by the movements of the major currency pairs, the market appears sceptical of the Fed Chair's statements:

  • The AUD/USD pair has refreshed the May highs of the current year and strengthened above 0.6700.
  • The USD/CAD pair is trading near strategic support at 1.3610.
  • The GBP/USD pair is approaching the March highs near 1.2900.

As we can see, the US dollar is slowly but surely losing ground in many directions, but by the end of the week, existing trends could either slow down or change direction dramatically.

AUD/USD

Technical analysis of the AUD/USD pair indicates the possibility of continued growth, as the May high of the current year has been refreshed, and the price has managed to strengthen above the significant resistance level of 0.6700. The nearest area for consolidation is the range of 0.6870-0.6850. In the event of a corrective pullback, the pair may test 0.6720-0.6700. The following events could increase the pair's volatility:

  • Today at 15:30 (GMT +3), the release of the US Consumer Price Index (CPI) for June.
  • Today at 15:30 (GMT +3), the weekly release of initial jobless claims in the US.
  • Tomorrow at 04:00 (GMT +3), the release of the MI Inflation Expectations in Australia.

GBP/USD

Buyers of the GBP/USD pair have managed to refresh the May high of the current year and are directing the price towards significant resistance at 1.2900. If this level transitions to support, the price could continue to rise towards 1.3100-1.3000. The nearest levels for a downward pullback are located around 1.2800-1.2760.

This morning, we are expecting the UK GDP data for May. At 15:00 (GMT +3), attention should be paid to the release of the NIESR monthly GDP tracker for the UK.