AUD/USD Forecast: Australian CPI Boosts Aussie But Gains Struggle
The AUD/USD pair reached a new 8-month high during the Asian session on Wednesday, fueled by stronger than expected Australian July CPI data. The currency pair surged but faced difficulty in maintaining gains above the key 0.6800 level.
While the subsequent pullback was modest, it raised concerns that the recent rally from the low of 0.6348 on August 5 might be losing momentum. The failure to surpass the previous peak at 0.6798 from July 11, coupled with the false breakout on Wednesday, added to the signs of a possible reversal. Additionally, indicators such as fading positive momentum and Stochastics showing bearish divergence on the daily chart, along with the twist in the daily cloud on Thursday, further supported the notion of a potential downturn.
Technical Analysis and Key Levels
The immediate bias for the AUD/USD pair is expected to remain bullish as long as the price holds above the 0.6761 level, which represents the former top from August 21, the low from August 27, and the upper 20-day Bollinger band. A breach below this level could signal the initiation of a bearish trend, with potential downside targets at 0.6734 and 0.6700, followed by more substantial support levels around 0.6655/10, where a cluster of daily moving averages converge and the Fibonacci 38.2% retracement of the rally from 0.6348 to 0.6812.
Resistance levels for the AUD/USD pair are seen at 0.6812, 0.6839, 0.6871, and 0.6904, where sellers might emerge to cap further upside moves.
Market Sentiment and Economic Factors
The Australian dollar’s strength in response to the robust CPI data reflects the market’s optimism towards the country’s economic outlook. A higher-than-expected inflation reading could prompt the Reserve Bank of Australia (RBA) to reassess its monetary policy stance, potentially paving the way for future rate hikes. This positive sentiment has been supporting the AUD/USD pair, despite recent struggles to sustain gains.
However, uncertainties surrounding the US-China trade war, global economic slowdown, and geopolitical tensions continue to weigh on investor sentiment and could impact the Australian dollar’s performance in the near term. Traders are closely monitoring developments in these areas for potential shifts in market dynamics.
Technical Indicators and Trading Strategies
Traders focusing on the AUD/USD pair are advised to pay close attention to key technical indicators and price levels for potential trading opportunities. The failure to break above 0.6800 and the signs of weakening momentum suggest a possible reversal in the near future. A decisive move below the 0.6761 level could trigger further selling pressure, with downside targets at 0.6734 and 0.6700.
Alternatively, a sustained move above the recent high at 0.6812 could reinvigorate bullish momentum and open the door for a retest of higher resistance levels at 0.6839, 0.6871, and 0.6904. Traders should remain flexible in their approach and adapt to changing market conditions to capitalize on potential trading opportunities.
In conclusion, the AUD/USD pair faces challenges in maintaining its recent gains despite the strong Australian CPI data. Technical indicators suggest a potential reversal in the near term, with key support and resistance levels to watch for trading opportunities. Stay informed and vigilant in your trading decisions to navigate the dynamic currency markets effectively.
