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James Hyerczyk

The Australian Dollar is trading lower early Wednesday, pressured by weaker-than-expected second quarter consumer inflation data.

According to the Australian Bureau of Statistics (ABS), headline CPI grew by 0.4% in the three months to June, leaving the increase on a year earlier at 2.1%. Traders had priced in a quarterly increase of 0.5%, and a year-on-year increase to 2.2%. The CPI miss marked the seventh consecutive time the data undershot economist expectations.

At 0526 GMT, the AUD/USD is trading .7402, down 0.0014 or -0.19%.

Quarterly Trimmed Mean CPI – of more importance to official interest rate settings from the RBA – rose by 0.5% for the quarter after seasonal adjustments, seeing the year-on-year increase fall back to 1.89% from the upwardly-revised 2.1% increase in the prior quarter. The result was in line with expectations, but fractionally below the 2% level forecast by the RBA back in May.

The fact that underlying inflation decelerated in the year to June, it all but ensures the RBA cash rate – as it has been since August 2016 – will remain at 1.5% for the foreseeable future.


Daily Swing Chart Technical Analysis

The main trend actually turned up according to the daily swing chart early Wednesday when buyers took out the previous swing top at .7443. However, the rally stalled at .7449. This only proves that investors aren’t willing to buy strength at this time. However, the recent secondary higher bottom at .7318 indicates they are willing to buy dips in defense of the multi-year low at .7310.

The main range is .7677 to .7310. Its retracement zone at .7492 to .7535 is resistance. It may actually be controlling the longer-term direction of the market.

The intermediate range is .7310 to .7484. Fittingly, the AUD/USD is straddling its 50% level at .7397. This tends to indicate the buying and selling is balanced.

The short-term range is .7318 to .7449. Its 50% level is .7383.

The combination of the two retracement zones makes .7397 to .7383 the key area to watch for direction today.

Daily AUDUSD (Close-Up)

Daily Swing Chart Technical Forecast

Based on the early price action, the direction of the AUD/USD the rest of the session is likely to be determined by trader reaction to .7397 to .7383.

A sustained move over .7397 will indicate the presence of buyers. If they can generate enough upside momentum, they may take a run at today’s intraday high at .7449. Overtaking this level with rising volume could lead to an eventual test of the main top at .7484, followed by the main 50% level at .7492.

A sustained move under .7383 will signal the presence of sellers. Taking out .7359 will change the minor trend to down and shift momentum to the downside. This could lead to an eventual test of the main bottom at .7318, followed closely by the main bottom at .7310.

Essentially, the short-term direction of the AUD/USD will be determined by trader reaction to .7397 to .7383.

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