Bullish view
- Buy the AUD/USD pair and set a take-profit at 0.6620.
- Add a stop-loss at 0.6480.
- Timeline: 1-2 days.
Bearish view
- Set a sell-stop at 0.6520 and a take-profit at 0.6480.
- Add a stop-loss at 0.6620.
The AUD/USD exchange rate drifted upwards on Tuesday as the focus shifted to the upcoming US inflation data. This rebound happened even as most currencies retreated against the greenback. It was trading at 0.6540, its highest point in more than a week.
US inflation data ahead
The Australian dollar rose slightly as traders waited for the closely watched US inflation numbers and as commodity prices retreated. Most commodities that Australia sells like iron ore and liquified natural gas (LNG) have pulled back in the past few weeks. This performance risks having an impact on the country’s economy.
The most important data to watch will be the upcoming US inflation report, which is one of the most crucial ones in the economic calendar. It is a vital report because it forms part of the Federal Reserve’s dual mandate of ensuring price stability and full employment.
The report will come a few weeks after the US published strong jobs numbers that revealed that the economy added over 350k jobs in January. Wage growth continued to accelerate, rising by 4.5% during the month.
Higher wage growth is an indicator that inflation could remain at an elevated level. Economists polled by Reuters expect the data to show that the headline Consumer Price Index (CPI) came in at 2.8% in January, an improvement from the previous month’s 3.4%. It will be the first month that the country’s inflation figure moved below 3%.
The Fed has done a good job in fighting inflation by combining its quantitative tightening (QT) policy with rate hikes. It has now hiked rates to a 22-year high and officials are debating when to start cutting. As such, it has maintained its data-dependence stance, which makes today’s report important.
AUD/USD technical analysis
The AUD/USD pair bottomed at 0.6480, where it formed a double-bottom pattern this month. The pair has now bounced back and is sitting at the neckline of this pattern. It has moved slightly above the 50-period and 25-period Exponential Moving Averages (EMA) while the MACD is in a strong uptrend.
Further, it has jumped above the key resistance point at 0.6525, its lowest swing on January 17th. The Percentage Price Oscillator is about to cross the neutral point. Therefore, the pair will likely continue rising as buyers target the key resistance point at 0.6620, its highest point between January 22nd and 31st of this year.
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