AUDUSD Forecast – Hovering Near 8-Month High as Traders Narrow Odds of RBA Rate Hike

The Australian Dollar is trading nearly flat on Friday but holding near an eight month high reached the previous session.  The currency is being supported by expectations of higher domestic interest rates following a hotter-than-expected consumer inflation report and optimism over China’s reopening.

At 09:11 GMT, the AUDUSD is trading .7117, up 0.0002 or +0.03%. On Thursday, the Invesco CurrencyShares Australian Dollar Trust ETF (FXA) settled at $70.42, up $0.10 or +0.14%.

Australian financial market traders have sharply narrowed the odds on further hikes from the Reserve Bank of Australia (RBA) following a surprisingly high reading for inflation in the fourth quarter.

Swaps imply around a 90% chance the RBA will lift rates a quarter point to 3.35% when it meets on Feb. 7, and have raised the peak for rates to 3.60% to 3.85%.

Headline consumer prices climbed 7.8% in the year to December, while a key core measure jumped to 6.9%.

Daily Swing Chart Technical Analysis

The main trend is up according to the daily swing chart. A trade through .7143 will signal a resumption of the uptrend. A move through .6688 will change the main trend to down.

The minor trend is up according to the daily swing chart. A trade through .6872 will change the minor trend to down. This will shift momentum to the downside.

The minor range is .6872 to .7143. Its pivot at .7007 is the nearest support.

The next major upside target is the June 3 main top at .7283.

Daily Swing Chart Technical Forecast

Trader reaction to .7115 is likely to determine the direction of the AUDUSD on Friday.

Bullish Scenario

A sustained move over .7115 will indicate the presence of buyers. Taking out yesterday’s high at .7143 will indicate the buying is getting stronger. This could help launch another breakout to the upside with the June 3 main top at .7283 the next major target.

Bearish Scenario

A sustained move under .7115 will signal the presence of sellers. If this move generates enough downside momentum then look for the selling to possibly extend into the minor pivot at .7007.