Bearish View
Set a sell-stop at 0.7100 and a take-profit at 0.7020.
Add a stop-loss at 0.7180.
Timeline: 1 day.
Bullish View
Set a buy-stop at 0.7150 and a take-profit at 0.7250.
Add a stop-loss at 0.7100.
The AUD/USD pair retreated on Tuesday morning as focus remained on the rising American inflation and the upcoming interest rate decision by the Federal Reserve. The pair is trading at 0.7120, which is slightly below last Friday’s high of 0.7190.
US Inflation and FOMC Decision
The Australian economic calendar and political events are relatively muted this week. Besides, the Reserve Bank of Australia (RBA) has already delivered its final interest rate decision of the year.
Therefore, for the AUD/USD pair, the focus remains on the United States. On Friday, the US published strong inflation numbers. The headline CPI jumped to a multi-decade high of 6.8% in November as the supply chain disruptions continued and energy prices rose. These numbers came exactly a week after data from the US showed that the country’s unemployment rate declined to a pandemic-era low of 4.2%.
The next key catalyst for the AUD/USD pair will be the upcoming US producer price index (PPI) that will come out on Tuesday. Economists expect that the data will show that the headline PPI jumped to a multi-decade high of 9.2% in November this year. The core PPI, which excludes the volatile food and energy prices, rose to 7.2%. Still, while the US inflation is rising, some analysts believe that it is peaking.
The pair will next react to the latest interest rate decision by the Federal Open Market Committee (FOMC) interest rate decision that starts today. The bank will deliver its last decision of the month on Wednesday.
Analysts expect that Federal Reserve will move more quickly to unwind its pandemic response tools. This means that it will continue tapering its asset purchases and then hint about future interest rate hikes. The Fed chair has already hinted about future tightening by backing down his previous assessment that inflation was transitory.
AUD/USD Forecast
The four-hour chart shows that the AUD/USD pair is trading at 0.7120. This price is slightly below the double-top at 0.7183. The price is also slightly below the 23.6% Fibonacci retracement level and the 25-day moving average. It is also along the standard pivot point while the Relative Strength Index (RSI) has turned lower.
Therefore, the pair will likely keep falling as investors wait for the upcoming FOMC decision. If this happens, the next key support to watch will be at 0.7050.
