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Aussie softens ahead of key inflation update and Fed interest rate decision

AUD - Australian Dollar

The Australian dollar is weaker this morning when valued against the greenback falling to an overnight low of 0.6894 before recovering around 0.6900 level. The Australian dollar continued to fall after last week’s comments from Reserve Bank of Australia (RBA) governor Philip Lowe having signalled that interest rates would remain low for "an extended period" and the market began pricing in expectations of further cuts to the RBA's already record-low cash rate. A light macroeconomic calendar on Monday kept the AUD/USD pair in a tight trading range ahead of the US Central Bank monetary policy meeting later this week. The Federal Reserve is forecast to cut interest rates on Wednesday by 25 basis points. Looking ahead today and we will see the release of Building Approvals at 11.30am. On Wednesday all eyes will be on the release of quarterly Consumer Price Index (CPI) with forecasts predict the trimmed mean reading will fall to 1.5% for the second quarter, which would be the lowest since December 2016.

From a technical perspective, the AUD/USD pair is currently trading at 0.6901. We continue to expect support to hold on moves approaching 0.6880 while now any upward push will likely meet resistance around 0.6935.

Key Movers

On Monday the Greenback held near a two-month high against a basket of currencies ahead of what is expected to be the first U.S. interest rate cut since the financial crisis. The Federal Reserve is forecast to cut interest rates on Wednesday by 25 basis points. Overnight the US released the Dallas Fed Manufacturing Business Index, which resulted worse-than-anticipated, printing -6.3 in July, following a reading of -12.1 in June. Looking ahead tonight the U.S. will publish June Personal Spending and Personal Income, alongside the PCE inflation. The core PCE price index is expected at 1.7%, up from 1.6% in May.

The Great British pound fell more than 1% against the Greenback overnight, to a 28-month low, as investors scrambled to factor in the growing risk of a no-deal Brexit and the chance that new British Prime Minister Boris Johnson will call an early election. The GBP/USD pair fell to an overnight low of 1.2211 a level that was last seen in March 2017. There are no scheduled macroeconomic data this Tuesday. From a technical perspective, the GBP/USD pair is currently trading at 1.2220. We continue to expect support to hold on moves approaching 1.2210 while now any upward push will likely meet resistance around 1.2250.

Expected Ranges

AUD/USD: 0.6800 - 0.7000 ▼

GBP/AUD: 1.7600 - 1.7800 ▼

AUD/NZD: 1.0300 - 1.0500 ▼

AUD/EUR: 0.6050 - 0.6250 ▼

AUD/CAD: 0.9000 - 0.9200 ▼