The Q2 2020 Australian Inflation data is due out on July 29 at 01:30 GMT. The expectation is for a steep drop from 0.3% in Q1 2020 to -2.0%. This would be a record drop if the expectation is met or if the figure is more negative. The figure from a year ago (Q2 2019) stood at -0.4%, and represented a drop from the previous figure of 2.2%.
The results for this data piece will have to contend with the prevailing sentiment in the market, which is hugely USD-negative. Here is how the trade could likely play out.
Outlook for AUDUSD
The pair has been in a strong uptrend for 2 months now. Therefore, traders need to consider the USD’s negative sentiment along with the numbers.
A drop in the actual number which is more negative than -2.0% is expected to be AUD-negative, but this may only cause a slight retracement drop that may provide an opportunity for bulls to re-enter along the direction of the major trend. Downside targets at 0.70595 and 0.70034 are possible considerations, along with other minor support levels which are more short-term than the levels mentioned here.
If the numbers come out as expected or more positive, the Aussie Dollar is likely to see strength and this could allow the pair to challenge highs not seen since April 2019 at 0.72043. A breakout above this high targets the 31 January 2019 high at 0.72977, with the 0.73831 and 0.74640 resistance targets also on the cards if the inflation figure is far better than expected.
Please note that the FOMC decision is also due for release tomorrow. More weakening of the US Dollar could be on the cards, and this could fuel the pair even further if the Fed delivers a dovish statement.
AUDUSD Daily Chart
