Bearish view
Sell the AUD/USD pair and set a take-profit at 0.6900.
Add a stop-loss at 0.7050.
Timeline: 1-2 days.
Bullish view
Buy the AUD/USD pair and set a take-profit at 0.7050.
Add a stop-loss at 0.6900.
The AUD/USD exchange rate has sold off since September when it peaked at 0.7235. It dropped to 0.6955 after the Reserve Bank of Australia (RBA) published minutes of the last meeting. Focus now turns to the upcoming US consumer inflation data and statements from top Federal Reserve officials.
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US Consumer Inflation Data Ahead
The AUD/USD pair dropped after the RBA published the minutes of its last meeting. Officials decided to raise interest rates by 0.25% at that meeting, the fourth hike of the year. They justified the move by the need to tame inflation, which has remained above target in recent months. Analysts predict that the bank will need to hike interest rates later this year.
The next main AUD/USD news will be statements by top Federal Reserve officials, including Christopher Waller, Tom Barkin, and Susan Collins. These statements will provide more information on what to expect from the bank in the last two meetings of the year.
The statements will come a day before the US releases the consumer price index (CPI) report. Economists expect the data to show that the headline CPI rose from 3.4% in August to 3.6% in September, with the core figure rising from 2.4% to 2.5%. Inflation has remained above the Federal Reserve’s target of 2.0% for over five years.
A stronger-than-expected inflation report will raise the odds that the Federal Reserve will hike interest rates again this year. The challenge, however, is that the recent jobs numbers showed that the economy added just 29,000 jobs as the unemployment rate rose to 4.2%.
Another challenge is that the ongoing inflation is caused by the rising energy prices, which the Fed has no control over.
AUD/USD Technical Analysis
On the charts, the pair has been in a downward trend since peaking at 0.7235 in September. It has now slipped to 0.6957 as the US dollar has continued strengthening.
The pair has slumped below the 50-day Exponential Moving Average (EMA). At the same time, it has formed a bearish flag pattern, which forms after a big drop is followed by an ascending or horizontal channel. This pattern often leads to a bearish continuation.
The pair has formed a shooting star candle, which is made up of a small body and an upper shadow. Therefore, it will likely have a bearish breakout in the near term, potentially to 0.6900.
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