Bearish view
- Sell the AUD/USD pair and set a take-profit at 0.6350.
- Add a stop-loss at 0.6500.
- Timeline: 2 days.
Bullish view
- Set a buy-stop at 0.6460 and a take-profit at 0.6525.
- Add a stop-loss at 0.6350.
The AUD/USD price pulled back slightly ahead of the upcoming American inflation data. It dropped to a low of 0.6427 as investors reflected on the outcome of this week’s midterm election in the US. This price is slightly below this week’s high of 0.6555.
US inflation data
The AUD/USD price retreated after China published its inflation numbers on Wednesday. According to the statistics agency, the headline consumer inflation dropped from 0.3% in September to 0.1% in October. On a tear-on-year basis, it declined from 2.8% to 2.1%.
Another data showed that the headline PPI data declined from 0.9% to -.1.3%. These numbers are important because China is the world’s factory. Therefore, as prices in the country drop, there is a likelihood that prices in most countries, including Australia will see prices drop.
The AUD/USD pair declined as investors reflected on the results of the American midterm election. Republicans managed to have a small gain in the House of Representatives. Therefore, there will be a significant deadlock in the country.
There will be no economic data from Australia on Thursday. Therefore, the pair will next react to the upcoming American inflation data. Economists believe that inflation remained at an elevated level in October.
Precisely, they expect that the headline CPI rose from 0.4% in September to 0.6% in October. This is expected to translate to 8.0%. Core CPI, which excludes the volatile food and energy products, declined from 6.6% to 6.5%.
A higher number than expected will mean that the Fed will continue hiking rates at an aggressive pace in the coming meetings. Analysts expect that the bank will hike by 0.50% in December followed by several 0.25% increases in 2023.
AUD/USD forecast
The AUD/USD price retreated from this week’s high of 0.6553 to a low of 0.6430, which was the lowest level since November 7. This price is along the 50-day moving average and is below the important resistance level at 0.6520, which was the highest point on October 27.
The pair is also slightly above the Ichimoku cloud while the Stochastic Oscillator has moved to the oversold level. It has also formed a double-top pattern. Therefore, the pair will likely continue falling as sellers target the key support at 0.6350.
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