The Australian dollar paired with the US currency is trying in vain to overcome the price barrier at 0.7000. The uptrend of the AUD/USD pair, which has been observed since mid-July, was saved before this resistance level. Despite numerous attempts, which is still there, in the area of the 69th figure.
In general, the 0.7000 level has always played the role of a tough nut – not only for bulls, but also for the bears of the AUD/USD pair. Traders had problems when storming it both "from top to bottom" and vice versa. In mid-June, amid the general weakening of the US currency, bears were able to impulsively break through this price barrier, but the pair slowed its decline at the base of the 68th figure. The aussie has attracted bulls who have been trying to organize a counteroffensive with targets of 0.7000, 0.7050 for several weeks. It is likely that they will succeed if the report on the growth of US inflation turns out to be in the red zone. But if the release does not disappoint (not to mention the green color), then the AUD/USD downward trend will again receive another momentum, which will allow the bears to pull the price at least to the bottom of the 69th figure, followed by a possible decline to the 0.6850 target (Kijun-sen line on the D1 timeframe).
Given the prevailing fundamental background, we can come to a fairly unambiguous conclusion: any more or less large-scale corrective upward pullbacks can be used as an excuse to open short positions. Short positions on the pair are relevant for two main reasons: the Federal Reserve's leadership in tightening monetary policy and the regular flight of traders from risk. These factors put background pressure on the aussie, especially since the Reserve Bank of Australia is no longer a reliable ally of the Australian currency. The results of the last RBA meeting disappointed AUD/USD bulls, so the upward trend stalled at the threshold of the 70th figure.
Let me remind you that at the July meeting, the RBA members raised the interest rate by 50 basis points for the third time, bringing it to 1.85%. Despite such a hawkish signal, the AUD/USD pair only reacted reflexively to the results of the meeting: after a few hours, the price turned 180 degrees and collapsed more than a hundred points down. The fact of a 50-point increase has already been taken into account in prices, so all the attention of traders was focused on the text of the accompanying statement. Market participants were interested in further prospects for tightening monetary policy. And here they were disappointed.
Firstly, the phrase about the termination of the emergency monetary support was excluded from the text of the final communique. This wording was present in the text of previous meetings.
Secondly, according to the conclusions of the August meeting, the RBA no longer sets the task of returning to the target inflation range within the next year. This time target has been replaced with a vague notion of "for some time."
Thirdly, the central bank mentioned the need to keep the country's economy "in a stable state." This phrase was included in the text of the accompanying statement instead of the above two.
Such subtle, but at the same time very transparent, hints suggest that the RBA will not decide on another 50-point rate hike this year. This fact disappointed AUD/USD bulls, after which the pair turned 180 degrees, interrupting the upward trend. A week has passed since the August meeting of the Australian central bank, but the aussie is still under background pressure. The AUD/USD pair tried to approach the borders of the 70th figure, but did not dare to storm the key resistance level.
Also, one more point should not be forgotten. According to the latest published data, the Australian consumer price index unexpectedly slowed to 1.8% QoQ in the second quarter (with a decline forecast to 1.9%). Over the previous three quarters, this indicator showed a consistent upward trend, reaching a peak of 2.1% in the first quarter. The result of the second quarter is not in favor of the Australian currency, especially amid ambiguous signals from the RBA.
Thus, the prevailing fundamental background suggests that in the medium term, short positions from the resistance level of 0.7000 are in priority for the pair. It should also be noted that for the development of the upward movement, AUD/USD bulls need not only to gain a foothold within the 70th figure, but also to overcome the price limit of 0.7070 (the upper limit of the Kumo cloud on the D1 timeframe). Therefore, even if the aussie impulsively overcomes the 0.7000 mark (as it was, for example, on August 1-2), this is not a reason for hasty conclusions about the resumption of the upward trend: AUD/USD bulls need not only to settle above this target, but also to break through the 0.7070 mark. In general, it is advisable to make trading decisions on the pair after Wednesday's inflation report: if the US CPI comes out at least at the forecast level, AUD/USD bears will have another reason to show character. The downward targets are 0.6920 (the average Bollinger Bands line on the daily chart) and 0.6850 (the Kijun–sen line on the same timeframe).