• AUD/USD rises to near 0.6945 as the US Dollar faces pressure ahead of the US CPI data.
• The US inflation data will influence market expectations for the Fed’s monetary policy outlook.
• Upbeat China Trade Balance data strengthens the Australian Dollar.

The AUD/USD pair trades 0.35% higher to near 0.6945 during the European trading session on Tuesday. The Aussie pair gains as the US Dollar (USD) underperforms its peers ahead of the United States (US) Consumer Price Index (CPI) data for June, which will be published at 12:30 GMT.

At press time, the US Dollar Index (DXY), which gauges the Greenback’s value against six major currencies, trades 0.1% lower to near 101.16.

Market participants will pay close attention to the inflation data as the latest comments from Federal Reserve (Fed) officials have signaled that they are more concerned about high inflation than subdued job market conditions.

On Monday, Fed Governor Christopher Waller said that another hot inflation figure would be a “signal”, not a noise, about the need to tighten monetary conditions further.

According to estimates, the US headline CPI growth cooled down to 3.8% Year-on-Year (YoY) in June from 4.2% in May, with core figures rising steadily by 2.9%. On a monthly basis, the headline inflation is seen declining by 0.1%, while core figures are estimated to have remained steady at 0.2%.

Meanwhile, upbeat China’s Trade Balance data has strengthened the Australian Dollar (AUD), which showed that trade surplus widened by USD125.62 billion against +USD121 billion estimates and the previous reading of +USD105.43 billion.

AUD/USD technical analysis

AUD/USD trades higher at around 0.6943 at press time. However, the near-term tone of the pair remains bearish as spot remains below the 20-day Exponential Moving Average (EMA), which is at 0.6957. The pair’s inability to recover this short-term EMA hints at persistent overhead supply, while the Relative Strength Index (14) around 44 keeps momentum mildly negative without reaching oversold territory, suggesting sellers retain control but lack strong conviction.

On the topside, immediate resistance is located at the 20-day EMA at 0.6957, and a daily close above this barrier would be needed to ease the current downside bias. The pair could extend the recovery towards the June 23 high at 0.7006 if the pair breaks above the EMA. Looking down, the pair could slide towards the January 7 high of 0.6766 if it drops below the March low of 0.6904.

(The technical analysis of this story was written with the help of an AI tool. Know more.)