AUDUSD Forecast – Hot Consumer Inflation Creating the Momentum Needed to Challenge .7137

The Australian Dollar is testing a five-month high on Wednesday after a report showed inflation in Australia rose to a new 32-year high of 7.8% in the final quarter of the fiscal year of 2022, rising at its steepest pace since March 1990.

At 05:32 GMT, the AUDUSD is trading .7104, up 0.0059 or +0.83%. On Tuesday, the Invesco CurrencyShares Australian Dollar Trust ETF (FXA) settled at $69.67, up $0.13 or +0.19%.

Economists polled by Reuters had forecast the quarter’s consumer price index to rise 7.5%, lower than the Reserve Bank of Australia’s forecast of 8%.

The “trimmed mean annual inflation,” a reading that excludes large increases and declines in prices, increased to 6.9%, the highest since the government has started publishing that information in 2003, the release said.

Australian Inflation Surge Supports Case for Another RBA Rate Hike

Australian inflation shot to a 33-year high last quarter, a shock that adds to the case for the country’s central bank to raise interest rates again next month.

Investors sharply narrowed the odds on the Reserve Bank of Australia (RBA) lifting its cash rate by a quarter point to 3.35% when it meets on Feb. 7. Prior to the release of the data, analysts had thought there was some chance the RBA might even pause its tightening campaign, but the sheer pace of inflation put an end to that thought.

Daily Swing Chart Technical Analysis

The main trend is up according to the daily swing chart. The uptrend resumed earlier in the session when buyers took out the minor top at .7064. A move through the Aug. 11 main top at .7137 will reaffirm the uptrend. The main trend will change to down on a trade through the nearest swing bottom at .6688.

The minor trend is also up. A trade through .6872 will change the minor trend to down and shift momentum to the downside.

The nearest support is a trailing minor pivot at .6690. The closest resistance is the main top at .7137.

Daily Swing Chart Technical Forecast

Trader reaction to .7045 is likely to determine the direction of the AUDUSD on Wednesday.

Bullish Scenario

A sustained move over .7045 will indicate the presence of buyers. A trade through the intraday high at .7032 will indicate the buying is getting stronger and could trigger an acceleration to the upside with the Aug. 11 main top at .7137 the next target.

Sellers could come in on the first test of .7137, but overcoming it could launch another acceleration to the upside.

Bearish Scenario

A sustained move under .7045 will signal the presence of sellers. This could trigger a break into the minor pivot at .6990. Since the main trend is up, buyers could come in on a test of this level. If it fails then look for a steep break into .6898.

Side Notes

A close under .7045 will form a closing price reversal top. This won’t change the trend, but if confirmed, it could trigger the start of a 2 to 3 day correction.