Bearish view
- Sell the AUD/USD pair and set a take-profit at 0.6337.
- Add a stop-loss at 0.6435.
- Timeline: 1-2 days.
Bullish view
- Set a buy-stop at 0.6410 and a take-profit at 0.6500.
- Add a stop-loss at 0.6335.
The Australian dollar drifted upwards on Tuesday morning ahead of the upcoming US Consumer Price Index (CPI) data. The AUD/USD pair bounced back to a high of 0.6387, which was a few points above last week’s low of 0.6337.
US consumer inflation data
The Australian dollar drifted upwards as traders waited for the latest US CPI data. Economists believe that inflation resumed their downtrend in October as the price of crude oil and natural gas remained under pressure.
Brent, the global benchmark, was trading at $82.5 while West Texas Intermediate (WTI) was hovering at $78.30. Oil was trading at over $95 a few weeks ago. The average gasoline price has retreated to $3.36.
Economists polled by Reuters expect the data to show that the headline CPI dropped from 0.4% to 0.1% in October. On a YoY basis, the CPI is expected to move from 3.7% to 3.3%. Core inflation, which excludes the volatile food and energy prices, is expected to remain at 0.3% and 4.1% on a MoM and YoY basis.
A weaker-than-expected inflation number will be bullish for the AUD/USD pair since it will point to status quo by the Federal Reserve. In its most recent meeting, the bank decided to leave interest rates unchanged between 5.25% and 5.50%.
In the accompanying statement, the bank signaled that it will be data-dependent when making its next decision. The first data was October’s Non-Farm Payrolls (NFP), which came two weeks ago.
According to the Bureau of Labor Statistics (BLS), the economy added over 150k jobs while the unemployment rate rose to 3.9%. Wages also dropped, signaling that the economic growth was softening.
AUD/USD technical analysis
The Australian dollar peaked at 0.6522 on November 6th and then pulled back sharply. It has dropped below the important support level at 0.6392, the highest swings on October 18th and October 25th. It has remained below the 25-period and 50-period Exponential Moving Averages (EMA).
The pair has also remained above the important support at 0.6358, the lowest point in September. Also, the Relative Strength Index (RSI) has drifted upwards and is nearing the neutral point at 50. Therefore, the pair will likely resume the bearish trend in the coming days as sellers aim for the next support at 0.6300.
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