AUD/USD at a Turning Point Ahead of China CPI. APAC Stocks at Risk?

Australian Dollar, China CPI, AUD/USD Outlook – TALKING POINTS

• Australian Dollar may fall with Asia-Pacific equities after Wall Street trade ended on sour note
• Yields declined with growth-oriented currencies while anti-risk Japanese Yen, Swiss Franc rose
• AUD/USD rejected at early-January swing-high: could this mark the beginning of a pullback?

The Nasdaq index briefly touched above an all-time high at 10,000 but ended the day less than 0.30 percent higher; its equity peers were not so lucky. The S&P 500 and Dow Jones closed 1.09 and -0.78 percent lower, respectively. The cycle-sensitive Australian and New Zealand Dollars were in pain along with the petroleum-linked Norwegian Krone while the anti-risk Japanese Yen and Swiss Franc prospered.

Gold prices ticked slightly higher, but silver and palladium both closed over one percent lower. The risk-off tilt may have been due in part to fading bullish sentiment alongside a worse-than-expected JOLTS job opening data. The figures came in at 5046, falling short of the 5750 forecast as the previous reading was revised down to 6011 from 6191.

Wednesday’s Asia-Pacific Trading Session

Wall Street’s sneeze may mean Asia-Pacific stock markets will catch a cold, and growth-oriented currencies like AUD and NZD may be at risk to declining as well. Their emerging market peers may descend with them, though the South Korean Won’s strong performance in the prior session may act as a cushion for potentially bearish sentiment in Asia.

Australian Westpac consumer confidence data for June will be published which could further undermine AUD. This comes at an especially politically-fragile time when Australia and its largest trading partner – China – are showing greater intra-regional friction. The Asian giant will be released its CPI report for June with expectations of a 2.7 percent increase for price growth. A disappointing figure could hurt the Aussie.

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AUD/USD Forecast

AUD/USD may be at a critical turning point. The pair recently crossed the 0.6911 threshold, though its failure to clear 0.7018 – which also marks the early-January swing-high – could be the early signs of a pullback. The clean rejection at resistance may inspire a wave of sellers to enter the market and capitalize on what may be a broader decline.

AUD/USD – Daily Chart

AUD/USD chart created using TradingView

--- Written by Dimitri Zabelin, Currency Analyst for DailyFX.com

To contact Dimitri, use the comments section below or @ZabelinDimitri Twitter