Aussie dollar bounces to reach short-term high

“However, it (Aussie dollar) later gave way to both the stronger US economic data and fell further on the Turkish risk off narrative,” said Stephen Innes, senior currency trader at FX and CFD firm OANDA Australia and Asia Pacific. 

However, despite the recent violence in Turkey, Innes noted that risk sentiment has slightly improved. 

“Risk sentiment has improved this morning after the failed coup attempt in Turkey,” said Innes. 

“Nonetheless, the current Australian dollar rally has been less than convincing as the trend is your friend rally is looking fatigued,” he said. 

According to Innes, “If expectations of the US Federal Reserve repricing continues to gain momentum as US economic data continues to churn,”

All eyes are eagerly awaiting the domestic Q2 CPI, the next primary Australian dollar driver. 

“In the lead up to the much-anticipated economic print, there will be a tendency for traders to sell into upticks on expectations moderate inflation will lead the Reserve Bank of Australia (RBA) to cut interest rates as it did so after the Q1 CPI disappointment,” said Innes. 

However, Innes expects near term ranges to hold ahead of tomorrow's release of the RBA Board meeting minutes.   

“With no clear bias in the RBA's July post-meeting statement, the report will get a fair bit of attention as the August rate cut is by no means a given based on the RBA's July neutrality,” added Innes. 

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