AUD/USD helped by strong commodity/equity prices, but remains capped under 0.7150 pre-US CPI

• AUD/USD has been ebbing higher but remains capped under 0.7150 and within recent ranges.
• Analysts have cited favourable price action in the base metals space and in global equities as benefitting the Aussie.
• The pair will likely remain fairly subdued, however, ahead of key US CPI data on Thursday.

It’s been a pretty quiet session for AUD/USD, with the pair ebbing higher and remaining support above 0.7100, but unable to test resistance at 0.7150. As things stand, the pair is about 0.2% higher on the day and continues to trade within last Friday’s ranges, though has pared the entirety of last Friday’s post-strong US jobs data drop back to the 0.7050 area.

Analysts have cited favourable price action in the base metals space as benefitting the material export-dependent Aussie, as well as favourable conditions in the global equity space. But any meaningful break, say, above last week’s highs in the 0.7160s, will likely have to wait until after Thursday’s US inflation data, where the YoY rate of Consumer Price Inflation is seen rising 7.3% YoY.

FX strategists have said that even an in line with expectations reading could bolster Fed tightening bets, underpinning the US dollar. That suggests the more likely direction for AUD/USD may instead be a break back under 0.7100 and toward’s last Friday’s lows just above 0.7050. Chatter about the potential timeline of RBA tightening also remains a key theme for AUD/USD, after former RBA board member John Edwards said on Tuesday that he thinks the bank might hike four times this year starting in August.

The RBA is yet to indicate plans to tighten that soon. Analysts at Westpac say they “stick to the view that the A$ should remain capped by the $0.7140/70 level given the very different stance that the RBA is maintaining versus a wide range of other central banks”. However, they continue, “we would look to use weakness towards $0.70 as an opportunity to buy for strength later in the year” he added, noting strong prices for Australia's major commodities.