Bearish view
- Sell the AUD/USD pair and set a take-profit at 0.6600.
- Add a stop-loss at 0.6750.
- Timeline: 1-2 days.
Bullish view
- Set a buy-stop at 0.6700 and a take-profit at 0.6800.
- Add a stop-loss at 0.6600.
The AUD/USD exchange rate was flat on Wednesday ahead of the latest US consumer price index (CPI) data. The pair was trading at 0.6683 where it has been in the past few days. This price is a few points above this month’s low of 0.6596.
US inflation data ahead
The AUD/USD price has moved sideways in the past few days. It remained in this range after last Friday’s non-farm payrolls (NFP) data. The report by the Bureau of Labor Statistics (BLS) showed that the unemployment rate dropped to 3.6% in June as the economy added over 209k jobs.
After Friday’s jobs report, the next important data to watch will be the upcoming US inflation data. Inflation data is important because it forms part of the Fed’s dual-purpose role.
Economists polled by Reuters believe that the headline consumer price index (CPI) rose slightly by 0.3% in June. On a year-on-year basis, economists expect that inflation dropped from 4% in May to 3.1% in June.
Core inflation, which excludes the volatile food and energy products, is expected to have dropped from 5.3% in May to 5.0% in June.
Traders will be watching whether inflation continued falling in June. In several statements this week, most Fed officials said that inflation remains much higher than the Fed’s target of 2.0%. As such, they have insisted that the bank will likely continue hiking interest rates in the next few meetings.
The US dollar index dropped to a low of $101.66, the lowest level since May 11th. It has dropped by more than 1.83% from the highest level this week. At the same time, American bond yields retreated ahead of the inflation data.
AUD/USD forecast
The AUD/USD pair has moved sideways in the past few days. It remains between the important resistance level of 0.6704 and the support at 0.6600. The pair is also between the middle and upper lines of the Bollinger Bands. The Relative Strength Index (RSI) has moved slightly above the neutral point.
Therefore, the outlook of the pair is neutral with a bearish bias. If this happens, the next key level to watch will be at 0.6600. A move above the resistance level at 0.6705 will invalidate the bearish view.
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