Asia Open: AUD/USD on watch amid Australia’s inflation data

US stocks dipped amid tech unwinding

US stocks marked its fourth straight day of losses overnight, but before one rushes to hit the sell button, there are comfort in knowing that the sell-off is not broad-based. While caution is in play, resilience in certain sectors of the market (consumer staples, real estate, healthcare) suggests that risk appetite remains broadly intact, with more rebalancing into Europe and China as well—market participants are simply becoming more selective, with a clear rotation from high-flying growth into areas of value underway.

US tech bore the brunt of the unwinding overnight once more, with weaker US data prompting market participants to reassess their lofty valuation. Notably, Tesla dipped 8.4%, while NVIDIA slipped 2.8%, with traders exercising caution ahead of the chipmaker’s earnings release after today’s market close.

Room for near-term calm?

At the heart of the sell-off was the US Consumer Confidence Index, which came in below expectations (98.3 vs. 102.7 estimated) and revive some concerns about slowing growth. More broadly, the US economic surprise index has now fallen to its lowest level since September 2024, with traders increasingly pricing for two Federal Reserve (Fed) rate cuts through 2024 to reflect more easing support for the economy. The US dollar struggled to regain its momentum, while US 10-year Treasury yields dipped to a new two-month low.

Ahead, there may be room for stability to return in today’s session, as we saw dip-buyers stepping up in the latter half of yesterday’s session to pare some losses. The VIX has also retreated off the 20 level – a level which has failed to be broken on three occasions this year and any level below 20 could still be supportive of the wider risk environment. Of course, the real test will revolve around NVIDIA’s earnings report, which could singlehandedly determine if markets can sustain any calm ahead.

Asia Open

We enter the Asian session with the Nikkei down 1.04%, the ASX down 0.28%, and the KOSPI down 0.05% at the time of writing. Losses remain relatively contained, supported by inexpensive valuations that provide some shelter from US tech weakness.

On the data front, Australia's consumer price index (CPI) came in slightly below expectations (2.5% vs. 2.6% est.), putting modest downward pressure on the AUD/USD. The lack of further build-up in inflation may offer room for the Reserve Bank of Australia (RBA) to consider further cuts, currently priced in for May. However, against the US dollar, expectations for further Fed easing—driven by weaker US data—could create a more balanced outlook for the AUD/USD.

Technical conditions for the AUD/USD continue to point to a near-term trend reversal, with a series of higher highs and higher lows forming since the start of the year. A key support level to watch is the 0.6300 mark, previously a resistance-turned-support zone, where buying on dips may remain the preferred approach. Meanwhile, the daily relative strength index (RSI) remains above its midline, reinforcing a bullish bias.