AUD/USD reclaims 0.6900 post London fix as US consumer spending drops

• The AUD/USD grinds higher despite a dampened market mood on a weaker greenback.
• Fed’s favorite gauge of inflation eases, but also consumer spending takes a hit, could the US economy support higher rates?
• Atlanta Fed’s GDPNow for the Q2 plunges towards -1.0%.
• AUD/USD Price Forecast: Seesawing around 0.6850-0.6950 as the pair consolidates in that area.

AUD/USD stages a recovery after plunging to fresh two-week lows around 0.6850s, reclaiming the 0.6900 figure, nearly gaining 0.60% on Thursday, after US inflation shows some signs of topping. At the time of writing, the AUD/USD trades at 0.6910 during the North American session.

A risk-off mood struck the financial markets on the last day of the first half of 2022. US equities extend their losses, and the greenback is falling, as shown by the US Dollar Index slumping 0.39%. Meanwhile, the US 10-year Treasury yield nosedives below the 3% threshold as recession fears increase, as illustrated by the Atlanta Fed’s GDPNow for the Q2 plunges towards -1.0%.

US inflation shows signs of easing; consumer spending falls

The US calendar reported inflation figures, which showed that it is slowing down. The Personal Consumption Expenditure (PCE) Price Index for May climbed by 6.3% YoY, less than foreseen, while core PCE, the Fed’s favorite reading for inflation, heightened by 4.7% YoY, lower than estimated, the US Bureau of Economic Analysis reported. Albeit a good sign for the US economy, the same report highlighted that American consumers spent less in May, for the first time in 2022, and previous numbers were downward revised, indicating that the economy is not as strong as thought.

At the same time, the US Department of Labour released the Initial Jobless Claims for the week ending on June 25, which topped above the 228K expected, and rose by 231K.

In the meantime, the Federal Reserve chair Jerome Powell crossed wires. He said policymakers’ job is to find price stability, even during the new forces of inflation, while adding that the US economy is solid and can withstand monetary policy adjustments.

Australia’s economic docket will feature the S&P Global Manufacturing PMI for June. Across the pond, the US docket will reveal S&P Global Manufacturing PMIs alongside the ISM Manufacturing PMI.

AUD/USD Price Forecast: Technical outlook

The AUD/USD remains in a downtrend, though slightly consolidating n the 0.6850-0.6950 range. Further confirmation of the previously-mentioned is the location and slope of the Relative Strength Index (RSI), albeit, at negative readings, it is almost horizontal. Nevertheless, the major’s price action on Thursday is rising sharply, and a break above the June 30 high at 0.6920 might open the door for further gains, but solid resistance near 0.7000 will be challenging to overcome. Contrarily, a continuation to the downside is in play, though it would accelerate once sellers reclaim 0.6850, which will send the pair tumbling towards the YTD low near 0.6828, followed by 0.6800.