Technical data

AUD/USD Forex Technical Analysis – Hot CPI data puts pressure on RBA to hike rates by 50bps next week

The Australian dollar is trading almost flat but up from its intraday low after a government report showed Australia’s inflation rate accelerated in the September quarter as oil prices energy soared, weighing heavily on households and businesses, while all but guaranteeing more interest rate hikes to come.

At 01:30 GMT, AUD/USD is trading at 0.6388, down 0.0006 or -0.09%. This is up from an intraday low of 0.6372. On Tuesday, Invesco CurrencyShares Australian Dollar Trust ETF (FXA) settled at $63.24, up $0.75 or +1.20%.

Australian inflation hits highest level in 32 years

The consumer price index (CPI) rose at an annual rate of 7.3% between July and September, the Australian Bureau of Statistics said on Wednesday. Economists had predicted the CPI would rise to 7% from the 6.1% pace recorded in the previous three months.

“The last four quarters have been strong quarterly increases due to higher prices for new home construction, motor fuel and food,” the Australian Bureau of Statistics said in its statement.

On a quarterly basis, the consumer price index gained 1.8%, more than the Reuters poll’s prediction of a 1.6% increase.

A closely watched measure of core inflation, the trimmed average, also climbed 1.8% in the quarter, bringing the annual pace to 6.1% and again well above the forecast of 5 .6%. This could pose a problem for the Reserve Bank of Australia (RBA), which would slow the pace of its rate cuts.

Higher inflation could prompt the RBA to increase the size of future rate hikes

Prior to the CPI report, financial markets had all but priced in another quarter-point hike from the Reserve Bank of Australia in November, and spot rates are expected to peak around 4.3%. With the unexpected rise in inflation, traders may be forced to rethink the magnitude of next week’s rate hike.


Daily Swing Chart Technical Analysis

The main trend is down according to the daily swing chart. However, the trend is upward. A trade through .6548 will change the main trend to the upside. A move to 0.6170 will signal a resumption of the uptrend.

The minor trend is also up. A trade through .6211 will change the minor downtrend. This will shift the momentum down.

The closest support is the short term 50% level at 0.6359 and the minor 50% level at 0.6291. The closest resistance is the long-term Fibonacci level at 0.6466.

Daily Swing Chart Technical Forecast

Traders’ reaction to the short-term 50% level at 0.6359 should determine the direction of AUD/USD on Wednesday.

Bullish scenario

A sustained move above .6359 will indicate the presence of buyers. The achievement of this week’s high at .6412 will indicate the presence of buyers. This could trigger a push towards the major Fibonacci level at 0.6466.

Since the main trend is down, traders should look for sellers on the first test of .6466. However, going over it could trigger an upside acceleration with .6548 the first target.

Bearish scenario

A sustained move below .6359 will signal the presence of sellers. This could trigger a quick break in the minor pivot at 0.6291.

Aggressive countertrend buyers may retrace the first test of .6291. They will try to form a secondary top bottom. If this level fails, however, expect selling to eventually extend between 0.6211 and 0.6170.