The Australian dollar’s bearish sentiment returned on Tuesday; however, the slide (bearish momentum) now appears to be fading as the market bulls step back in front of the key support area of US$0.6870-80.
The market got an update of China’s CPI report, which came in at 2.1% year-over-year to the end of April against the 1.8% forecast and March’s print of 1.5%. PPI came in at 8.0%, instead of 7.8% expected and 8.3% previously.
Meanwhile, as investors monitor comments from many U.S. Federal Reserve speakers this week, we also get an update of the key April Consumer Price Index (CPI) report, which is expected to show that inflation may have peaked, which could temporarily soothe global markets if confirmed.
The U.S. Bureau of Labor Statistics will release the April Consumer Price Index (CPI) data on Wednesday, May 11 at 10:30 pm Sydney time.
According to forecasts, the (U.S. CPI) report is expected to show headline inflation rose 0.2% in April, while the forecast is at 8.1% year-over-year.
That compares with a whopping 1.2% increase in March, or an 8.5% gain year-over-year.
The Core U.S. CPI is expected to rise 0.4% or 6% year over year, which compares with 0.3% in March or 6.5% on an annualised basis.
Based on the technical assessment, the Relative Strength Index (RSI) 3-daily ‘lookback’ indicator is negative; however, bullish divergence is evident, while the Moving Average Convergence Divergence (MACD) holds a negative signal and also supports bullish divergence.
The ADX (trend) indicator supports a mild bear trend.
From the given rebound, if the bullish divergence can strengthen, the upside call could reach the region of US$0.7055 if US$0.6990 is cleared. Reassess from there.