AUSTRALIAN DOLLAR FUNDAMENTAL BACKDROP As we enter the second half of 2023, the Australian dollar is trading at a key inflection point against the US dollar after yesterday’s Independence Day celebrations in the US. The morning kicked off in Asian trade with two important economic releases including both the Australian PMI and Chinese Caixa PMI’s. Both missed estimates and highlighted the growing concern of global recessionary fears as tight monetary policy takes hold. The Ai Group Industry Index measures changes in activity for the industrial sector and has pushed lower revealing a deeper negative contraction. China being such a close trading partner with Australia, has added to the AUD selloff due to its ‘pro-growth’ nature and high positive correlation with the Chinese economy. Major Australian commodity prices are under pressure as the greenback remains marginally bid alongside the weaker Chinese backdrop. Later today, markets look forward to the FOMC minutes which should provide some clarity into the Fed’s mindset at the previous meeting where rates were kept constant. Further corroboration against Fed Chair Powell’s most recent hawkish comments will be crucial for short-term directional guidance. Daily AUD/USD price action now trades within and ascending triangle formation (dashed black line) where the upper resistance bound is respective of the 0.6700 psychological level. The convergence by both the 50-day and 200-day moving averages respectively, make for an area of confluence that could provide breakout potential. A break below triangle support could invalidate the pattern and extend the medium-term downtrend while a break above resistance will likely open up subsequent resistance zones. IG CLIENT SENTIMENT DATA: MIXED IGCS shows retail traders are currently net LONG on AUD/USD, with 64% of traders currently holding long positions. At Daily FX we typically take a contrarian view to crowd sentiment but due to recent changes in long and short positioning we arrive at a short-term cautious disposition.