Morning report: AUD/USD at key technical level as APAC trading starts

Monday’s Asia-Pacific outlook

New Zealand’s second-quarter inflation rose at a 7.3% year-over-year pace, beating the 7.1% y/y Bloomberg forecast. The RBNZ hiked rates again last week, the sixth consecutive meeting to do so. Despite the RBNZ’s early rate hike liftoff, the New Zealand dollar is down sharply against the US dollar in recent months. Economic headwinds and a global shift out of risk assets have hurt the Kiwi dollar.

China reported 691 new Covid infections on Saturday, with the most recorded in Gansu and Guangxi provinces. 580 of those were local infections, the highest level since May 23. Shanghai saw cases increase as well, with the local government adding and removing numerous neighborhoods to high and medium level alert status. Industrial metals may come under further pressure this week if cases continue to increase.

India votes on its next president today, although votes won’t be counted until July 21. The clear favorite to win is the BJP-led National Democratic Alliance’s Draupadi Murmu. India has gained some attention from offshore investment as China’s policy crackdown continues to rattle global investors. China may see foreign direct investment data cross the wires today.

Elsewhere, the United Kingdom is set to suffer from a historic heatwave that may send power demand surging. That could see the UK and European natural gas prices trim losses from last week. Meanwhile, the Nord Stream 1 Pipeline remains offline as Gazprom, the pipeline’s operator awaits a turbine to return from Canada, although the status is unknown.

Notable events for July 18:

• Singapore – Balance of Trade (June)
• Australia – HIA New Home Sales MoM (June)
• India – Presidential Election

AUD/USD technical outlook

AUD/USD trimmed losses into the weekend, pushing prices up to Falling Wedge resistance. A breakout is on the cards if prices can pierce above the wedge, with a measured move above the psychologically important 0.7000 level possible. The RSI on the eight-hour timeframe crossed above its 50 mid-point on Friday, a bullish oscillator signal.

AUD/USD eight-hour chart

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