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A list of market updates dragged the Aussie lower today.

I’m looking at AUD/USD possibly extending a longer-term uptrend anyway.

What do you think?

AUD/USD Trade Idea

AUD/USD 1-hour Forex Chart
AUD/USD 1-hour Forex Chart

News of the Australian government planning a stimulus budget that would keep the country in deficit for much longer than markets had expected got some ratings agencies and market players jittery. It also doesn’t help that China’s Dalian Commodity Exchange (DCE) has proposed lowering the iron content in the ores it’s using from 62% to 61%. Bad news for Australia, which exports a lot of iron ore.

Meanwhile, profit-taking, concerns over the fresh airstrikes in Gaza, and a bit of risk-aversion continue to drag high-yielding currencies like the Aussie lower against safe-havens like the dollar.

AUD/USD is now trading just under the .7800 mark, which is about 110 pips from its May peak. What’s interesting about today’s levels is that it’s near a 50% Fib retracement and an inflection point on the 1-hour time frame.

AUD/USD hasn’t seen short-term buying pressure yet, but I’m keeping my eyes peeled in case Aussie buyers plan to extend the pair’s uptrend. After all, the global economy continues to recover as more people are vaccinated and more major economies open up businesses.

Today’s U.S. CPI report can give a clearer picture of where AUD/USD is headed. If the report prints weaker than analysts are expecting, then the Fed could be on to something with its “high inflation will be temporary” story and markets could shrug off high inflation concerns in favor of buying more high-yielding bets like comdolls.

But if we see faster-than-expected consumer price increases, then traders may go back to worrying about prices being too high and the Fed not doing anything about it. AUD/USD could extend its downswing all the way to the trend line support closer to .7725.

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