AUD/USD: minor recovery within deep bear trend

AUD/USD staged a minor recovery in the US as Wall Street recovered on a strong bounce, despite the greenback picking up the pace on decent data.

AUD/USD made fresh lows on the back of RBA Governor Stevens talking in Asia about the continued low inflation risks to the Aussie economy. He has set the stage for possible rate cuts later in the year by referring to inflation as “really a bit too low”. He also let the cat out of the bag when he said that the Aussie rate is a “shock absorber” that is “doing what you would expect it to do at the moment”. The release of the Q2 CPI data is scheduled for July 27 and another soft number is likely to underpin speculation for another rate cut in August. "We retain a dovish outlook for the RBA, but precisely how many more rate cuts are in the pipeline will depend on a range of events stemming from concerns about Chinese demand for iron ore and coal, the labour market, the domestic housing market and the outlook of the AUD," explained analysts at Rabobank.

Gold is another factor weighing on the Aussie, extending the May downtrend as the Fed hype up June as an appropriate time to hike rates.

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AUD/USD levels
"In the 4 hours chart, the 20 SMA has extended its decline to converge with the mentioned Fibonacci retracement, reinforcing the strength of the static resistance level, whilst the technical indicators have resumed their slides after correcting oversold readings, in line with further declines, particularly on a break below the daily low," explained Valeria Bednarik, chief analyst at FXStreet.