AUD/USD Forex Technical Analysis – Hot CPI Data Puts Pressure on RBA to Hike Rates by 50bps Next Week

The Australian Dollar is trading nearly flat but up from its intraday low after a government report showed Australia’s inflation rate accelerated in the September quarter as energy prices soared, weighing heavily on households and businesses, while nearly guaranteeing more interest rate hikes to come.

At 01:30 GMT, the AUD/USD is trading .6388, down 0.0006 or -0.09%. This is up from an intraday low of .6372. On Tuesday, Invesco CurrencyShares Australian Dollar Trust ETF (FXA) settled at $63.24, up $0.75 or +1.20%.

Australian Inflation Hits 32-Year High

The Consumer Price Index (CPI) rose at an annual rate of 7.3% in the July to September period, the Australian Bureau of Statistics said on Wednesday. Economists had predicted CPI would quicken to 7% from the 6.1% pace reported in the previous three months.

“The past four quarters have been strong quarterly rises off the back of higher prices for new dwelling construction, automotive fuel and food,” the Australian Bureau of Statistics said in its statement.

On a quarterly basis, the consumer price index gained 1.8%, more than the Reuters poll’s prediction of a 1.6% increase.

A closely watched measure of core inflation, the trimmed mean, also climbed 1.8% in the quarter, lifting the annual pace to 6.1% and again far above forecasts of 5.6%. This could pose a problem for the Reserve Bank of Australia (RBA), which was seen slowing the pace of its rate cuts.

Higher Inflation Could Spur RBA to Increase Size of Future Rate Hikes

Ahead of the CPI report, the financial markets had all but priced in another quarter-point hike from the Reserve Bank of Australia in November, and cash rates were expected to peak around 4.3%. With the unexpected rise in inflation, traders may be forced to rethink the size of next week’s rate hike.


Daily Swing Chart Technical Analysis

The main trend is down according to the daily swing chart. However, momentum is trending higher. A trade through .6548 will change the main trend to up. A move through .6170 will signal a resumption of the uptrend.

The minor trend is also up. A trade through .6211 will change the minor trend to down. This will shift momentum to the downside.

The nearest support is the short-term 50% level at .6359 and the minor 50% level at .6291. The nearest resistance is the long-term Fibonacci level at .6466.

Daily Swing Chart Technical Forecast

Trader reaction to the short-term 50% level at .6359 is likely to determine the direction of the AUD/USD on Wednesday.

Bullish Scenario

A sustained move over .6359 will indicate the presence of buyers. Taking out this week’s high at .6412 will indicate the presence of buyers. This could trigger a surge into the major Fibonacci level at .6466.

Since the main trend is down, traders should look for sellers on the first test of .6466. However, overtaking it could trigger an acceleration to the upside with .6548 the first target.

Bearish Scenario

A sustained move under .6359 will signal the presence of sellers. This could trigger a quick break into the minor pivot at .6291.

Aggressive counter-trend buyers could return on the first test of .6291. They will be trying to form a secondary higher bottom. If this level fails, however, look for the selling to possibly extend into .6211 to .6170.

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