Bearish view
- Sell the AUD/USD pair and set a take-profit at 0.6400.
- Add a stop-loss at 0.6575.
- Timeline: 1-2 days.
Bullish view
- Set a buy-stop at 0.6420 and a take-profit at 0.6500.
- Add a stop-loss at 0.6350.
The AUD/USD pair rose slightly on Wednesday morning after the closely watched Australian consumer inflation report. It also rose to the psychologically important point at 0.6500, which was higher than this week’s low of 0.6363.
Australia inflation is falling
Australia’s inflation continued pulling back in the first quarter of the year in a positive sign for the country’s central bank. According to the statistics agency, the headline CPI retreated to 3.6% in the first quarter, higher than the expected 3.4%.
The country’s inflation has been in a strong downtrend after peaking at 7.8% in the fourth quarter of 2022. It had retreated to 4.1% in the fourth quarter of last year as it continued matching towards the RBA’s target of 2.0%.
Therefore, the current report means that the RBA is making progress although the road to its target will be long. The RBA expects that the rate will drop to 2% either in 2025 or 2026. Other countries like the United States have shown that moving from 3% to 2% is taking longer than expected.
The RBA has constantly left interest rates unchanged at 4.35% and pointed that it is done with its hiking cycle. Therefore, most analysts expect that the bank will start cutting rates later this year if inflation continues to fall.
The biggest risk for the RBA is if the country goes through reflation, which is happening in other countries like the US. Recent economic data showed that inflation in the country jumped from 3.1% in February to 3.5% in March.
Looking ahead, the next important data to watch will come out from the United States, which will publish the latest durable goods order numbers. Economists expect the report to show that the country’s orders rose by 2.5% in March. These numbers will come a day before the country publishes the first quarter GDP report.
AUD/USD technical analysis
The AUD/USD pair formed a long-legged doji pattern on Friday and has now bounced back as the risk-on sentiment prevailed. It has bounced back above the crucial resistance point at 0.6446, its lowest swing on February 14th.
The pair has remained below the 50-day Exponential Moving Average (EMA), meaning that bears are still in control. It has also moved inside the symmetrical triangle pattern shown in green. Therefore, the pair will likely remain in a tight range on Wednesday as traders wait for the US GDP and PCE numbers. The key support and resistance point to watch will be at 0.6363 and 0.6550.
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