24.07.201815:35 Forex Analysis & Reviews: AUD / USD: All attention is paid to Australian inflation

The Australian dollar paired with the US currency continues to trade in the price niche of 0.7330-0.7450, reacting impulsively to the current changes in the fundamental background.

In general, AUD / USD is within the southern trend, but the bearish dynamics can be traced only on the monthly chart. On the chart W1, we see a slightly different picture. Over the past six weeks, the pair is practically standing still. After the southern impulse, the price rolls back to the previous values in anticipation of a new news driver. Such an algorithm allows you to open long or short reverse positions, depending on the direction of the next pulse. The long-term vector of the motion of AUD / USD has not yet been determined due to "stagnation" in the issue of the trade war between the US and China.

Last week, the Australian dollar reacted positively to data on the Australian labor market. At first glance, the release really made a positive impression. The unemployment rate returned to a record low mark of 5.4%, and the number of employees increased by almost 60 thousand, updating the growth record since November last year. But, as you know, "the devil is hidden in small things". The structure of the basic indicators indicates that the level of unused supply of labor remains unacceptable.

Thus, the number of unemployed Australians who want to find a full-time job has increased by more than five thousand, and the total number of such applicants has reached half a million people. Also, the level of unemployment with incomplete employment remains at high enough marks. This trend primarily slows the growth of average wages. This indicator has long been troubling the Central Bank of Australia. Weak wages in turn inhibit inflation, which is already at a fairly low level.

That is why the initial reaction of AUD / USD to the release of data on the Australian labor market was replaced by a southern impulse. Over the day, the pair overcame more than one hundred points, reaching a price peak of 0.7445, the price in a few hours reached a minimum of 0.7323. Traders came to the conclusion that without the growth of salaries and, accordingly, inflation, the RBA will not return to the issue of tightening monetary policy. Therefore, the positive numbers of the published release could not change the general fundamental background of the pair.

Tomorrow, traders will again be able to "participate" in a similar AUD / USD rally, as data on inflation will be published in Australia. According to general forecasts, the consumer price index should show positive dynamics, both in quarterly terms and in annual terms. If this forecast is justified, the Australian dollar will receive considerable support, as inflation for a long time showed a certain stagnation.

Last year, the CPI in the quarterly range ranged from 0.2% to 0.6%. The first quarter of 2018 showed a decline in the indicator to 0.4%. In annual terms, the indicator reached the same level of 1.9%. In the second quarter of this year, experts expect an increase of + 0.5% q / q and + 2.2% y / y. In this case, the pair AUD / USD again approaches the upper limit of the price range, that is, to the middle of the 74th figure. And it is in this price area that it is advisable to consider short positions on a pair, since even justified inflation growth will not be able to unfold the southern trend. The reason is the notorious trade war between China and the United States, which adversely affects the commodity market and indirectly on the Australian economy.

The US-China trade conflict continues to gain momentum, despite a public lull. Take a look at the dynamics of the pair USD / CNY. The yuan continues its rapid decline, reaching 6.823 (the last time the pair was at this level in June last year and then, within the downtrend). China continues to devalue the national currency, although it does not recognize the intentionality of its actions. The States are also "not asleep". Today, the US Commerce Department begins a public discussion on the introduction of new tariffs on the import of Chinese goods worth $ 16 billion.

Let me remind you that on June 15, Donald Trump confirmed the US decision to establish a 25% tariff for 50 billion dollars of Chinese exports. Duties on 34 billion came into effect on July 6, and decided to wait with the "remaining" 16 billion. According to the White House, the Trade Representation will discuss the feasibility of their introduction. Experts believe that Washington thus allowed Beijing to meet and "agree on a compromise", but China, as we see, ignored this signal. Therefore, the fate of new tariffs for 16 billion is predetermined. The outcome of the discussion in the Trade Representation is not difficult to predict. Further escalation of the trade conflict has and will put pressure on the commodity market. In particular, iron ore and copper continue to show a downward trend.

Thus, the Australian remains under the yoke of a negative fundamental background. Therefore, any "internal" economic successes provide only temporary support to the AUD / USD pair. The growth of Australian inflation should also be viewed through the prism of an external fundamental background, opening short positions at impulse price jumps.