AUD/USD Talking Points:
- USD falls to support on Core PCE data
- AUD/USD falls to support zone at 0.6700 to 0.6650
- US Core PCE has been declining since August’s high of 1.80%, which was released around the same time that DXY notched its highest close since May of 2017
- See IG Client Sentiment for a closer look at current retail sector positioning on the Australian Dollar
Since the London session open (3 AM ET) US Dollar price action has been bearish, sending the index down near the 97.75 level. In the same time period, the Australian Dollar has appeared especially sensitive to US Dollar strength. The pair has been unable to catch recent lows of 0.6710 as the US Dollar index has fallen by over 0.15%. When compared to GBP/USD, it is clear to see just how sensitive the Australian Dollar has been to US Dollar Strength.
DXY, AUD/USD, GBP/USD 15-Minute Price Chart
Chart prepared by Austin Sealey; AUDUSD on TradingView
The Core PCE Price Index is commonly used to measure inflation in the US. The two seasonal and more volatile food and energy prices are left out to paint a clearer picture of price increase or inflation. This measure, along with CPI, is closely watched by the Federal Reserve as a part of determining monetary policy. As a reminder, higher inflation in the short term indicates economic strength. This morning’s print, as can be seen in the DXY chart below, has had an overall minute effect, and the index is still unable to buck support.
DXY 60-Minute Price Chart
Chart prepared by Austin Sealey; DXY on TradingView
US Core PCE comes in following Wednesday’s FOMC rate decision and yesterday’s annualized 4th quarter 2019 US GDP data release. The US Dollar has witnessed some bearish price action following both data releases, but has since found support at the 97.80 level that has come into play as resistance turning into support since seeing a 2-hr candle closing above the 97.85psychological level.
As risk appetites will continue to vary widely in the coming weeks, traders turn their eyes toward the US manufacturing and employment sectors for Feb 3rd release of ISM data.
--Written by Austin Sealey, Market Analyst for DailyFX.com
