Bearish View
- Sell the AUD/USD pair and set a take-profit at 0.7140.
- Add a stop-loss at 0.7250.
- Timeline: 1-2 days.
Bullish View
- Set a buy-stop at 0.7240 and a take-profit at 0.7300.
- Add a stop-loss at 0.7170.
The AUD/USD pair is in a tight range ahead of the upcoming American consumer inflation data and as commodity prices keep rising. It is trading at 0.7192, where it has been in the past few days. This price is slightly below the highest point this month.
Inflation Data Ahead
The AUD/USD pair has moved sideways in the past few days even after the Reserve Bank of Australia (RBA) caught many investors by surprise. In its decision this week, the bank decided to hike interest rates by 0.50% for the first time in two decades. The bank also hinted that it will continue hiking interest rates in the coming months.
Still, analysts believe that Australia’s inflation will continue rising as the cost of energy remains at elevated levels. In a statement, former RBA governor, Ian MacFarlane said that inflation will likely not drop to the neutral point at 2%. Instead, he believes that it will rise to 8% and then settle at about 5%.
Meanwhile, the AUD/USD pair is reacting to the rising commodity prices. The Bloomberg Commodity Index (BCOM) rose to $136, helped by oil and gas prices. Other commodities that Australia sells like coal and copper have all surged in the past few days. Higher commodity prices are usually beneficial to the Australian economy.
The next key driver for the AUD/USD pair will be the upcoming US inflation data that are scheduled on Friday. Economists expect the data to show that the country’s inflation declined slightly from 8.3% to 8.2% while core inflation declined from 6.2% to 5.9%.
American bond yields have risen ahead of these numbers. The 10-year yield has risen to 3.03% while the 30-year and 5-year yields rose to 3.18% and 3.04%.
AUD/USD Forecast
The 4H chart shows that the AUD/USD pair formed an ascending channel shown in black. The pair is slightly below the lower side of the ascending channel. It is also moved along the 25-period and 50-period moving averages and is between the 23.6% and 38.2% Fibonacci retracement levels. Further, the price has moved to the Ichimoku cloud.
Therefore, the pair will likely keep rising keep falling as bears target the next key support level at 0.7120. A move above the resistance at 0.7230 will invalidate the bearish view.
