AUD/USD Forex Technical Analysis – Weakens Under .7360, Strengthens Over .7379; US CPI on Tap

The Australian Dollar is edging lower early Wednesday amid stronger-than-expected consumer and producer inflation reports from China. Dampening the selling pressure was the better-than-expected Westpac Consumer Sentiment report. The Aussie was on the defensive the previous session after early strength failed to attract enough buyers to continue the move.

At 04:35 GMT, the AUD/USD is trading .7367, down 0.0013 or -0.17%.

China’s October factory gate prices rose at the fastest pace since 1995, beating forecasts and further squeezing profit margins for producers grappling with soaring coal prices and other commodity costs due to the power crunch.

China’s consumer price index (CPI) grew 1.5% in October year-on-year, quickening from September’s 0.7% rise and beating the 1.4% gain tipped by the Reuters poll, according to NBS data.

Additionally, a measure of Australian consumer sentiment inched higher in November as optimism on the economy just outweighed worries about personal finances, while the outlook on employment took a marked turn for the better.

Daily Swing Chart Technical Analysis

The main trend is down according to the daily swing chart. A trade through .7360 will signal a resumption of the uptrend. A move through .7556 will change the main trend to up.

The minor trend is also down. A trade through .7431 will change the minor trend to up. This will also shift momentum to the upside.

The AUD/USD is currently trading on the weak side of a long-term retracement zone at .7379 to .7499. Inside this zone is a minor resistance level at .7458.

The short-term range is .7170 to .7556.  The Aussie is currently testing the upper level of its retracement zone at .7363 to .7317. This zone is controlling the near-term direction of the Forex pair.

Daily Swing Chart Technical Forecast

The direction of the AUD/USD on Wednesday is likely to be determined by trader reaction to .7363 and .7379.

Bearish Scenario

A sustained move under .7363 will indicate the presence of sellers. Taking out the main bottom at .7360 will signal a resumption of the downtrend and could trigger a sharp break into the Fibonacci level at .7317.

We could see a technical bounce on the first test of .7317, but if it fails, prepare for a potential acceleration to the downside.

Bullish Scenario

A sustained move over .7379 will signal the presence of counter-trend buyers. If the short-covering rally is strong enough then look for a surge into .7431.

Taking out .7431 will shift momentum to the upside. This could trigger a further rally into .7458.

Side Notes

The U.S. will release its latest consumer inflation figures at 12:30 GMT. Month/Month CPI is expected to come in at 0.6%. Core CPI is expected to have risen by 0.4% in October. Stronger than expected data could trigger a break in the AUD/USD because it could mean the Fed will have to raise rates sooner than expected.