AUD/USD Forecast: Australian inflation could make it or break it

AUD/USD Current Price: 0.6396

• AUD/USD benefited from firmer stocks and easing US government bond yields.
• Australian annual inflation is foreseen up by 7% YoY in the third quarter of the year.
• AUD/USD gains upward traction but still needs to break above 0.6450.

The AUD/USD pair hovers around the 0.6400 level early in the Asian session after peaking on Tuesday at 0.6411. The pair spent the first half of the day consolidating just above the 0.6300 level, gathering upward momentum during US trading hours.

The advance can be attributed to the positive tone of US equities, as Wall Street managed to extend its recent gains on the back of encouraging earning reports. Additionally, market players are lifting bets the US Federal Reserve will slow the pace of tightening before year-end, as policymakers began expressing their concerns over the negative effects of higher rates.

Whether AUD/USD could extend its gains will depend on the upcoming Australian data. The country will release the Q3 Consumer Price Index, expected to have increased at an annual pace of 7%. The quarterly reading is foreseen at 1.5%, decreasing from 1.8% in the previous quarter. The RBA trimmed Mean CPI is foreseen at 5.6% YoY, up from the previous 4.9%. Higher than anticipated figures may take a hit on the AUD as market players would favor increasing bets on a more aggressive Reserve Bank of Australia.

AUD/USD short-term technical outlook

The AUD/USD pair is holding above a Fibonacci level, the 23.6% retracement of its latest daily decline at 0.6345. The 38.2% retracement provides resistance at 0.6450. Technical readings in the daily chart fall short of supporting additional gains, yet at the same time, reflect decreasing selling interest. Technical indicators advance but remain below their midlines. At the same time, the pair is crossing above a now flat 20 SMA but remains the weekly high set on Monday at 0.6410. The longer moving averages, in the meantime, keep heading firmly south, far above the current level.

In the near term, and according to the 4-hour chart, the risk skews to the upside. The pair trades above is 20 and 100 SMAs, with the shorter one en route to cross above the longer one. Technical indicators have lost their bullish momentum but remain near their daily highs well above their midlines.

Support levels:  0.6275 0.6230 0.6190

Resistance levels: 0.6345 0.6380 0.6415

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