Bearish View
- Sell the AUD/USD pair and set a take-profit at 0.6640.
- Add a stop-loss at 0.6725.
- Timeline: 1-2 days.
Bullish View
- Set a buy-stop at 0.6700 and a take-profit at 0.6750.
- Add a stop-loss at 0.6640.
The Australian dollar pulled back against the greenback ahead of the crucial US consumer inflation data. The AUD/USD price retreated to 0.6676 on Wednesday morning, lower than last month’s high of 0.6870.
US Inflation Data Ahead
Traders are still focusing on the next Federal Reserve actions as the US economy sends some mixed signals. On Friday, data by the Bureau of Labor Statistics (BLS) revealed that the American labor market remained strong in December. It added over 200k jobs as the unemployment rate remained at a historical low of 3.7%.
These numbers came two days after the Federal Reserve released minutes of its past meeting. In it, these minutes showed that most members of the committee believed that it was done hiking interest rates.
In that meeting, the bank decided to leave interest rates unchanged between 5.25% and 5.50%. The dot plot, on the other hand, pointed to three rate cuts this year, in a major shift from its hawkish tone in 2022.
The next important data to watch will be Thursday’s Consumer Price Index (CPI) data from the US. Economists polled by Reuters expect the numbers to show that the headline inflation rose slightly in December to 3.2%. They also see the core inflation, which excludes the volatile food and energy prices, falling to 3.8%.
These numbers will help traders predict what will happen in the March meeting. The Fed Rate Monitor shows a 61.3% probability that the Fed will cut rates in March.
The AUD/USD pair also retreated after the latest Australian inflation data. According to Australia Bureau of Statistics (ABS), the monthly CPI indicator retreated from 4.90% in October to 4.40% in November. This figure, which is much higher than the RBA target of 2.0% means that the bank could maintain a hawkish tone in the upcoming meeting.
AUD/USD Technical Analysis
The AUD/USD pair has been in a steep sell-off in the past few days as traders assess the next actions by the Fed and RBA. This retreat has ended the bullish momentum that started in November when it plunged to 0.6270. It has dropped below the 50-period Arnaud Legoux Moving Average (ALMA) and the 23.6% Fibonacci Retracement level.
The pair has also dropped below the Woodie pivot point at 0.6728. Therefore, the outlook for the AUD/USD pair is moderately bearish, as bears aim for last week’s low at 0.6640. A move above the resistance at 0.6728 will invalidate the bearish view.
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