AUD/USD Forex Technical Analysis – Weak Longs Bracing for Hot U.S. Consumer Inflation Data

The Australian Dollar is edging lower on Thursday, following through to the downside after posting a steep sell-off the previous session. The price action suggests Aussie traders may be bracing for any upside surprise in today’s upcoming U.S. inflation report and what it might mean to the Fed’s aggressive tightening ahead.

At 04:31 GMT, the AUD/USD is trading .6415, down 0.0016 or -0.25%. On Wednesday, the Invesco CurrencyShares Australian Dollar Trust ETF (FXA) settled at $63.57, down $0.76 or -1.18%.

In another potentially bearish development, a top official of the Reserve Bank of Australia (RBA) said on Thursday it might be getting nearer to the point when it might be able to “sit and wait” on raising interest rates, but more evidence was needed that demand was slowing as desired.

US Consumer Inflation Report on Tap

October’s CPI report, due Thursday at 13:30 GMT, is the next focal point for investors. Economists expect the consumer price index to rise 0.6% from September. That would mark a jump from 7.9% compared with the same month a year ago, according to Dow Jones.

It would also show chilled growth from September, when the CPI saw a year-over-year gain of 8.2% and a month-over-month gain of 0.4%.

Excluding food and energy, the CPI is expected to rise 0.5% over the prior month and 6.5% year over year. That would be slower than the 0.6% gain with the exclusions in September and the 6.6% seen a year ago.

Weaker than expected CPI data could underpin the AUD/USD. A stronger-than-expected report could trigger a steep loss since it will increase the odds of another super-sized rate hike by the Fed in December.

Daily Swing Chart Technical Analysis

The main trend is up according to the daily swing chart. A trade through .6551 will reaffirm the uptrend. A move through .6272 will change the main trend to down.

On the upside, the major support is the long-term Fibonacci level at .6466. This is followed by a 50% level at .6543 and a 61.8% level at .6631.

On the downside, the nearest support is the 50% level at .6360.

Daily Swing Chart Technical Forecast

Trader reaction to the long-term Fibonacci level at .6466 is likely to determine the direction of the AUD/USD on Thursday.

Bearish Scenario

A sustained move under .6466 will indicate the presence of sellers. If this creates enough downside momentum then look for a test of .6360.

Look for a technical bounce on the first test of .6360 since the main trend is up. If it fails then look for the selling to possibly extend into the main bottom at .6272.

Bullish Scenario

A sustained move over .6466 will signal the presence of buyers. This could trigger an acceleration into the resistance cluster at .6543 to .6551.

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